PDSes: These are "dumb" data stores. The do not do anything except store data and handle authentication. Your account "lives" on them, but you can migrate between them seamlessly, and keep your data when you migrate.
Relays: These connect to PDSes over websocket and store all the data from them. They provide a "firehose" of data through websockets. The advantage of relays is that there is far less missing information than on the fediverse.
AppViews: These connect to relays and take the posts. They sort through the data and only keep what is relevant for them.
For example, bsky.app is an appview. It connects to the bolson.bsky.dev relay, and only takes objects that have an app.bsky.* nsid/type. frontpage.fyi is another one, it connects to the relay1.us-west.bsky.network relay, it ignores all posts that except for ones with fyi.frontpage.* nsids, and that are too long.

This approach is way better than activitypub.

Relays aren't necessary, nor expensive to run (anymore). For example, appviewlite can be run easily, and can be configured to crawl PDSes itself, rather than using a relay.

The cost in running relays has also dropped. It's roughly $34 a month. Read this article by a bluesky dev: https://whtwnd.com/bnewbold.net/3kwzl7tye6u2y.

It has the potential to be federated in a meaningful way in the real world right now.
I'm not going to deny that most people using bluesky's servers is a problem, because it is.

Jack Dorsey wasn't very involved in bluesky, and isn't involved at all anymore. He left the board and deleted his account after they did moderation.

Bluesky, right now, is federated in a meaningful way. Whether or not it's decentralised only depends on your definition of the word at this point.

Also: the people who work at bluesky, right now, have very good intentions. I don't really think any are crypto-bros. The main problem is investors trying to claw back some value after they invested in it.