To bump this topic up a bit, and to answer a few questions asked about the PS3, as well as to clarify a few things, I am now making another post. A long post.
Yes, the Playstation 3 is backwards compatible with both the Playstation 2 and Playstation 1. Similar to what the PS2 offered for the PS1 in terms of backwards compatibility, we can expect about 99.9% of all PS2 and PS1 games to be BC.
Both versions of the PS3 (the $499 SKU, and the $599 SKU) come with harddrives, wireless controllers, and the ability to go online out of the box. The $499 version comes with a 20 Gig Harddrive (the same size as the 360 Premiums), while the $599 version comes with a 60 Gig Harddrive. What is cool about the Playstation 3 (and what the other two consoles don't offer), is that any 2.5" harddrive will fit in the system, and work. So you can buy a PC harddrive and put it in your Playstation 3 and it will work just fine.
The main differences between the two models aren't majorly drastic. You can get the $499 Playstation 3 and still be set with all of the main features that a great console offers. The $599 one is just uber and sexy. The $499 has a smaller harddrive, no SDFlash slots, no HDMI, no memory slots, and no Wifi connectivity. Wifi is wireless internet. You can still connect to the Internet with a cord with the $499 version.
The Playstation 3 is also very upgradeable. You will be able to swap any PC harddrive in and out of your PS3, you can add in Wifi connectivity, the SDFlash slots, and memory slots if you so choose. The $599 PS3 also has a nice chromatic metal...sleaky...thing, that's really sexy, on one section of the PS3 to show that it's the uber PS3 and not the normal one.
When I first heard the price I thought "That's too much money.", but it's a great value when you look at the larger picture. We get a Blu-Ray player with it. There's only one of those on the market at the moment, the Samsung one, and it costs about $1000 (it's also not even a great player - first gen and all).
Admittedly, yes, if you don't have an HDTV you won't reap a major benefit from Blu-Ray. However, the PS3 also plays standard DVD's. Blu-Ray has built-in BC with DVD's. In case noone knows what Blu-Ray is, exactly, it's a new disk format that holds much higher data capacity, and displays in better quality. If you own a HDTV and are tired of crappy DVD's not formatted properly to fully exploit your high-definition capabilities, Blu-Ray is for you. It's basically for HDTV owners. It's sort of necessary. DVD is entirely obsolete for HDTV purposes. It works fine for normal televisions and whatnot, but it doesn't cut it for HDTV. Consoles typically have a market life of 5 to 6 years (with the exception of the Xbox, which only lasted 4 years before Microsoft totally dumped all support of the system - awesome. =P). At the moment, about 12% of individuals own HDTV's. HDTVs are coming down in price and as that happens more people will buy in to it. The Playstation 3 is "future proof", per say, because of the inclusion of Blu-Ray. The 360 still uses a last generation disk format, DVD.
Imagine if we were still stuck with CD's for Videogames for the Xbox and PS2. Yuck. Each console generation, the format moves up to something higher. It's for a very good reason. Look what happened to Nintendo with the 64 when they failed to move on to CD's, and stuck with the cartridge format. They took a downward spiral. As games become more complex over time, and require more data, so must the formats move up. Blu-Ray is a better format than DVD, and is well suited for gaming especially.
Also...the Playstation 3 is more powerful than the 360. I'm not talking about what a Sony guy said either. John Carmack himself stated as much.
The Playstation 3 is a better console. It's also more expensive. But as the old saying goes, you get what you pay for. And with the PS3, you HELLA get what you pay for.
