Sony might have glossed over the ability to use the Vita as a PS3 controller during its press conference, but this video should offer all the explanation you need. Joystiq took a trip to Sony’s E3 booth, and managed to shoot a video of the Vita operating as a controller in LittleBigPlanet 2.
The results are unexpectedly mind blowing. In one two-player demo, the Vita is used to control a space-ship which Sackboy is actually inside. Moving the space-ship in the Vita level causes the environment to change in the PS3 stage. It's absolutely nuts.
An alternative single-player demo sees the Vita being used as a radar to discover hidden objects in the environment, and gameplay switching between the two screens.
The functionality is obviously similar to Nintendo’s own Wii U, but this solution has the benefit of additional processing power from the Vita hardware itself. The potential on offer here is staggering, and what’s even more exciting is that creators will have access to the tools required to create their own cross-controller stages courtesy of LBP2's intuitive level editor.
Sadly, the feature requires such an enormous investment that we're not sure it's going to get supported to the degree it deserves. That would be a shame.