How are Gran Turismo online games physically hosted?

Solution 1:

Quoting from the Gran Turismo FAQ:

What is the role of the host in an online race event?
Last Updated: Dec 24, 2007

In the online gameplay (Star type) of Gran Turismo 5 Prologue there is a host player.

The host has the following two roles:

(1) Manages the start and end of races.

(2) Performs the communication between all participant players for internal data communications during gameplay.

Because of this, if the host exits out of a race during the race, the race itself will be terminated. Also, please note that if the connection environment of the host deteriorates, the cars on screen may not drive properly.

For this reason, the software automatically evaluates the network connection environments of the participant players, to select the players with the most suitable network connection as the host.

The actual upstream bandwidth of the host is especially important since they will be communicating with other players. Therefore the software evaluates both the NAT type of the players, and the measured connection speed during actual play as well.

Regarding evaluation of your network connection environment, please refer to the following page.

I know this information covers the Prologue rather than GT5 itself, but I can't find any references to whether or not they changed the networking model between then and GT5. There is no other relevant FAQ entry for GT5, so I'm making the assumption that this information is still valid.

Based on this, it appears that the games are, indeed, hosted by one of the players and not on the PSN servers. If I'm reading this right, the game determines which player has the best connection as the time, so you shouldn't have to worry about it yourself. That said, having more people on a wired instead of wireless connection would help, since their bandwidth still matters for timely communication with other racers through the host.

Solution 2:

According to this article which cites the Playstation Magazine:

My Lounge supports voice chat for up to 32 players and lets you host 16-player online races...

(Emphasis added)

This would lead me to believe that the My Lounge matches are hosted by a player and not on PSN servers.