Dreddz is correct.
However, I read reports from about a couple of months ago was that the PS3 was having a lot of problems with the emulation of the older systems. It can do it, but they haven't gotten the software to work properly yet. So, to 'temporarily' solve this problem, all the launch PS3s will basically have PS2 hardware inside of them until they figure out how to make the software emulation work.
The same thing happened at the PS2's launch. The PS1 emulation software wasn't ready, so all the launch PS2s had PS1 hardware in them so they could be backwards compatible. How many people still have working PS2s from yr 2000?
Edit: Found the link of what I read, so you don't think I'm talking out of my butt...
http://www.engadget.com/2006/06/05/r...-a-ps2-inside/
It came out of someone else's butt first :P