As I understand it, the VOB container has support for audio, db 2.0, 5.1 and DTS among others, mpeg2 video stream and a number of selectable subtitels. However, PS3 can only play the video and audio streams from the VOB file. This is why the subtitles doesn’t appear.
Many tools can strip and combine audio, video and subtitles in a single VOB file, including DVDfab. Which is often called VOB file passthrough, which is the fastes way to backup a DVD and also lossless since neither audio or video content is re-encoded. But to be able to display subtitles you would like to hardcode the sub to the VOB file but that requires re-encoding the video stream, which takes time and reduces quality. And I have not been able to find any tool that can do this for that matter.
But, strangely enough, the PS3 apparently supports selectable subtitles in an XViD file, as stated in the head of this thread, which as far as I understand it, is done in a similar way as in a VOB file. Hopefully, PS3 will eventually support the subtitle part of the VOB file and this problem will be gone for ever. But until then…