when ever the game freezes i usually wait a little bit to see if it continues and then hold the the touch sensitive button that looks like this I/O
is this the right thing to do (it won't be bad for the game or system)

That is the correct way to hard reset your system. If you have the "fat" PS3, DO NOT touch the main power switch in the back. That will f**k it up. You'll know when your system crashes when you don't see the read light (yellow light in the middle) flashing. That means the optical drive isn't streaming data anymore. Also the PS3's home button won't work. You can also eject the disc, put it back in, and the PS3 will do the same reset.