The MKV container is gaining traction and it is a very good container as it can hold any combination of video/audio unlike most other formats but unfortunately the big hardware makers do not support MKV containers and support may be a long time coming.
In the mean time there are some quick tools that will allow you to convert a MKV file consisting of H.264 video with AC3/AAC audio into an MP4 container which both game consoles can understand. This does not re-encode the video it just extracts it, sets the level @ 4.1 and re-encodes the audio if necessary then re-muxes into an MP4 or M2TS file that will be playable on the console.
PS3Muxer (highly recommended for PS3)
XenonMKV (highly recommended for Xbox 360)
Rebox.NET (supports both Mp4 & M2TS)