The PS2 does a pretty good job of making PS1 games more palatable. Will the PS3 have the same capabilities? Not really.
According to Harrison, unlike how the PS2 would enhance PS1 games with texture smoothing and what not, the PS3 will offer no such visual enhancements (including resolution enhancements) for the previous generation titles. "They are as exactly as they were," said Harrison, who claims Sony preferred to rather deliver them in their original state.
Fair enough: for retro games, it's really art direction that makes a game age gracefully. Harrison also clarified that eventually they want all their old PS1 games available for download, except for games that were made with licensed talent or tracks where those licenses have expired.