PS3 backwards compatibility to be handled via software emulation. Good luck with that
Here's something we can all speculate wildly about: it looks like the PS3 will be using software to emulate the PS2 on the PS3, instead of the hardware solution used to emulate PS1 games on the PS2. Confused yet?
The PS2 actually included PS1 hardware: the input processor for the PS2 was luckily the same chip as the main processor for the PS1. This was somewhat of a lucky break, and it meant that all the PS1 games would play perfectly on the PS2 with very little effort on Sony's part. This was a large selling point at launch when gamers could play all of their PS1 games. Without that hardware, it would have been much more difficult to get every game running so quickly. This is what Sony faces with the PS3. The PS2 is an infamously complicated system, having to emulate it in software for the PS3 will be a challenging task. If the early reports are to be believed progress is coming steadily, with many titles already up and running. Let's hope so.
Backwards compatibility plus an inexpensive DVD player was a one-two punch that helped the PS2 rocket to the top last generation. With backwards compatibility and a Blu-Ray drive in the PS3, Sony is obviously hoping for the same thing this round. Gamers will expect every game to work at launch, and to work perfectly. This is something that MS hasn't been able to achieve with the 360, giving Sony the chance give gamers yet another reason to wait for the PS3.
If Sony is able to pull off the emulation, it will be quite the achievement, and a huge selling point for the system.