The Inquirer wrote a little article on NVIDIA's RSX. In the beginning Sony planned to base its entire PlayStation 3 on the Cell processor but they quickly learnt that the Cell processor wasn't perfect for graphics. So they teamed up with NVIDIA who started developing the RSX.
It is said that the RSX isn't designed from scratch, it is believed to be a 90nm G70 chip (GeForce 7800 GTX) with some tweaks.
We wrote before that Sony will do those chips in its own factories so Nvidia doesn’t have to worry about yields, TSMC architecture and stuff like that as Sony is supposed to make everything work. Nvidia still has to tape out its RSX chip but it should happen very soon now.
ATI on the other hand spend already two years to develop the R500 chip for the Xbox 360. According to some reports that was just enough time to finish the chip. More details at The Inquirer