According to a a report from Japan's Ultra One magazine, the PS3 will contain a whole PlayStation 2 chipset inside its massive hulk in order to ensure backwards compatibility. Word is that while Sony has claimed the PS3 is powerful enough to handle full PS2 emulation, the actual software isn't ready yet, so they'll use PS2 chips as a stopgap while they finish up. Obviously, the pricey hardware will mean even more losses to Sony at launch, but supposedly once they figure out emulation they'll pull the chips to lower their costs. If this all turns out to be true, it wouldn't be the hugest surprise, since Sony did the very same thing with the PS2 to gain compatibility with the original PlayStation.

The Ultra One article had a few other tidbits of note, including a quote from Sony's Izumi Kawanishi stating that the PS3, as it was announced, is "nothing more than just the basic system." Sony apparently has plenty of upgrades in store for the console, which could make PS3 one of the most diversified (and probably expensive) pieces of "standard" hardware going in the gaming world. They did say that they won't be breaking compatibility, and even if it happens by accident, the console can accept updates over the Internet. Also, the magazine states the console has a "large amount of flash memory," so that no matter what hard drive you end up with, you'll always have the system software running from the included flash.

News-Source: http://gaming.engadget.com"