
There's an interesting post by Shu Yoshida over at the PlayStation Blog that sketches out the general process of bringing a PlayStation game into being. Shu is the Senior Vice President of Product Development for SCEA, and explains that SCEA doesn't so much have a "green light" process as it does a "red light" one:
I think it's fair to say that Chris would've preferred it if someone had shined that red light on Lair, but I digress. Shu also explained that SCEA "almost never" places an order for a game by saying something like "We need a fantasy game. Go make one.", instead believing that the best ideas come from the imagination and inspiration of the designers.
The Making of a PlayStation Game [PlayStation.Blog]