If you have folding turned on it will only kick in when the system is sitting idle. If you are playing a game, watching a movie, etc. it will be off.
What folding does is use the processing power of your PS3 to do calculations to process data for medical research. This research could, some day, lead to a breakthrough on treatment or cures of several diseases including Parkinson's, Alzheimer's and several forms of cancer.
The decision to use it is up to you- the folding is turned off by default.