From siliconera.com:
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PlayStation 3s without PS2 backwards compatibility are missing the Emotion Engine, a chip Sony designed as the PS2's CPU. What if the PS3's cell processor could emulate the Emotion Engine? Theoretically, all PlayStation 3s would be able to play PS2 games even if a console didn't have the proper hardware. According to a recent patent filed by Sony Computer Entertainment in the US, Sony has the code and technology ready to do this.

There are two main ways to emulate hardware. Interpretation is when target code is decoded and converted into a language the host can understand. The other strategy is to decode and recompile programs in the host's language.

Maybe the concept is better explained another way. Interpretation is like having someone constantly translating English to Japanese for you, non stop, twenty four hours a day wherever you go. Decoding and recompiling is like someone translating a sets of words and putting them in a dictionary you can reference.
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Full Story: siliconera.com

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