A BBC show called Watchdog makes the life of Sony marketing a bit tough these days in the UK. The show interviewed some PS3 (old version) consumers that experienced the so called Yellow Light of Death.
The BBC Watchdog show claims that about 12,500 PS3 consoles sold in the UK (from overall 2.5m) failed with a Yellow light flashing on the front panel. Sony does not like to call this issue the Yellow Light of Death, as it does not describe the bug that can be more complex.

Sony also says that there are less than the 12,500 faulty PS3 consoles.
The issue is real, but only a relatively small number is affected, but of course if it is your PS3 console that fails you do not care.
BBC has an extensive article on this issue here.