I'm entirely too lazy to go find the post by the sony exec but I believe it's 5 systems total, or maybe 5 extra systems. but you can have your account activated on that many PS3's and access to all the content you have downloaded, as such you can share the games you own with that many friends.
There was a big stink about this when it was first revealed, David Jaffe (God of War guy) was super pissed, but he is always pissed. the big sony exec said it encouraged community or something. It shouldn't be too hard to dig up if someone cares to.
I believe it is officially referred to as Playstation Network Game Sharing.