I figured that I would put this out there hoping that it would deter the questions in random threads (and the half ass answers).
It's very simple to do. As far as I know, you NEED to burn the ISO to a disc. There may be some re-direction later, but for now, burn it to a CD. Put the CD in your PS3. Now fire up MultiMan and go to the file manager. Browse to dev_flash / ps1emu / ps1_emu[dot]elf (or something like that). Run the ps1_emu[dot]elf file. If will fire up the PS1 emulator that will boot the burned game in the drive. Done.
EDIT: There is one drawback as boltocrank pointed out, there is no saving.