They patched the BIOS. The very first PS1 units allowed you to bypass security from the Audio CD player, but Sony soon got wise to it.
Ya, the first generation PS1s only did the security check once and let you do a swap without the disk spinning. You basicly just insert a CD, let it security check, swap the disk as your sitting in the audio menu, choose to start the application, and as it boots into the game it will omit the security check a second time because it assumes the first check was valid enough.
Japanese models SCPH-3000 and lower as well as US and European models SCPH-1001 and SCPH-1002 have the CD player bug. Rumor is that some of the later batches of those models fix it, but for certain they are fixed by version SCPH-5000 which was the next series.