Sony talked about its impressive list of backwards compatibility on older games, as a matter of fact, all games. However, that really was not the case and many older games didn't function to the level you would expect when labeling something "compatible."
With the latest 1.5 firmware upgrade the problem is virtually non-existent. Initially a "handful of games" (100 to 200 or so) didn't work to the satisfaction of gamers. Some had glitchy pixelated graphics while others had no sound at all. This firmware upgrade stomps out those bugs and gives you an impressive library of games unlike its Microsoft competitor.
Microsoft has a team that works on backwards compatibility on a per game basis (or at least it seams) and every now and again we'll see a few Xbox games make the list. Half the time the games that make it are those nobody cares about while we wait for the hotter titles to make the list.
Sony doesn't have this problem - games will just work without being hand designed to function on the system. A few games may still exhibit problems but the bulk of the games are now ready to go; the list of PlayStation games is huge.
The end result is a set of games that look better than the original console and play like the original console. Now, you can sell off your old system when you upgrade to the PS3 and save some space in your console rack.
source: 1up.com
