From what I understand, the answer is no... At least not directly. There are some real-time transcoding and streaming programs you can use, but short of somehow reencoding the file, no.
Of course MKV, or Matroska, is just a container format like AVI. Within that container you might have virtually any combination of audio and video codecs being used. Actually one of the big reasons for the shift away from AVI is that AVI doesn't play nicely with things like variable bit rate audio or having multiple audio streams (english and spanish audio for example). They can be kind of hacked in, but it's ugly and doesn't always work well, whereas MKV is designed with support for it.
Hi I own a PS3 slim 120GB...I want to know if I can play MKV files on ps3...if yes then how ??