The PS3 version allows you to create and play only one household per game.
You can remove Sims from your household by kicking them out or moving without them, but any Sims you boot are permanently removed from the game.
You can add Sims to your household via pregnancy, adoption, marriage, or inviting a friend to move in. Their looks can be changed via the Karma Powers mentioned in a previous reply, and traits can be changed using the Mid-Life Crisis LTR.