Not 100% correct. The original model PS3 had the 'Emotion Engine' (or some derivative thereof) physically inside the unit, which it used to provide the 95% backward compatibility that the launch PS3's had. Soon after, they changed the size, put out 40GB and 80GB versions (instead of the 20GB and 60GB that launched), and these were missing the physical 'Emotion Engine' and instead had a software implemented emulation layer. The emulation wasn't perfect and their compatibility dropped to something like 80%-85%.
Shortly after that, they just ditched the backwards compatibility altogether, effectively saying that they didn't care to spend any more time on it to make it work better, they'd rather put out new games (I somewhat agree with them), and that if you wanted a PS2, go buy one, they're still on sale. Now, considering it was advertised as one of the selling points initially, perhaps they should change their marketing slogan:
"It only does everything" should become "It only does everything, until we decide it shouldn't do something at a later date, at which point we'll remove it without asking."
Yes, yes, I'm just trolling on that -- they only did that once, and only with the Other OS feature.