A well known cracker named George Hotz (GeoHot), best known for iPhone jailbreaking, began to target the PS3's security to enable full access to the PS3's graphics capabilities via the Linux install option that the PS3 originally shipped with. Sony was concerned that that would enable piracy, so they removed the Linux install option in a firmware update.
If you refused to install that firmware update, you could continue using your PS3 with that Linux installation, but you wouldn't be able to play new games or potentially play online. Basically, compute clusters that relied on that install continued working, and continue to work today.
The removal of that option incensed many PS3 purchasers, tech writers, hackers, etc. George Hotz then went on to crack the PS3's security anyway, enabling arbitrary code to run on the device (including applications that would let you run pirated PS3 games). Sony sued Hotz, ostensibly because he enabled massive piracy. This further incensed varied and sundry "hacking" organizations which began to target Sony. Eventually, Sony dropped the case against Hotz, for reasons that are difficult to discern (bad publicity for the most part). At this point, various hacking groups were able to penetrate the Playstation Network as well as many other Sony properties, resulting in hundreds of millions of dollars of lost income at this point.
That's exactly what George Hotz does. He breaks security. iPhone security, PS3 security, etc. He's not a hacker according to the RMS definition, the pg definition, or probably most of the classical definitions. He may fit the current journalist's definition of "hacker" which is much closer to RMS' cracker. Since the web site we are on is named hacker news after the original definition, I think we should probably go with cracker for the people that primarily break security.
However, he primarily breaks security on devices he purchased, so that he and others can repurpose them for their own needs and desires. That is a very "hacker" thing to do. "I have this device. Can I make it do something useful?"
If he were primarily breaking security on other people's computer systems, then the distinction would likely be merited.
I disagree with this, let's not forget RMS did a lot of "cracking" himself, like the ITS password hack and some shady things like reverse engineering code from Symbolics and gave it to Lisp Machine.
GeoHotz did a hard and ingenious hack to get his ps3 to do things it's not longer suposed to do. That's not cracking per se. I think cracking mostly happens with things like these folks did. Using a simple SQL injection (probably automated) to hack Sony's site.
It's all in the ingenuity level. That where the distinction should be.
If you refused to install that firmware update, you could continue using your PS3 with that Linux installation, but you wouldn't be able to play new games or potentially play online. Basically, compute clusters that relied on that install continued working, and continue to work today.
The removal of that option incensed many PS3 purchasers, tech writers, hackers, etc. George Hotz then went on to crack the PS3's security anyway, enabling arbitrary code to run on the device (including applications that would let you run pirated PS3 games). Sony sued Hotz, ostensibly because he enabled massive piracy. This further incensed varied and sundry "hacking" organizations which began to target Sony. Eventually, Sony dropped the case against Hotz, for reasons that are difficult to discern (bad publicity for the most part). At this point, various hacking groups were able to penetrate the Playstation Network as well as many other Sony properties, resulting in hundreds of millions of dollars of lost income at this point.