As far as I can recall, the 1 teraflop figure was for Cell's capabilities or something. It wasn't specifically applied to PS3 by KK, but the media started pinning it as a benchmark figure for the system. No-one here's expecting 1 TFlop in PS3, at least not conventional processing.
It seems to me that MS's 1 Teraflop figure was a knee-jerk marketting rection to Sony's. Any number you can use, we can use better! I don't think the numbers are at all relevant as they neither offer fair comparisons of the systems (because both parties will be making up whatever numbers they can to out-value their opponents, including even the system's number - 360>3!!) nor provide useable benchmarks that give an indication of what the systems' realworld performances will be like. Kinda like this generation, where fans toot numbers showing one system's better than the other, but I can't see much difference between them all myself.