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Japanese Magazine Ultra One says Sony is including the PS2 hardware in PS3s in order to provide complete (or close to complete) backward compatibility with previous generation games. Sony is looking for their back catalog of PS1 and PS2 games to bolster their sales of PS3s, something Microsoft isn't really worried about, as the Xbox 360 backward compatibility updates have been slow in coming.

Including extra hardware will bump up the cost to manufacture the PS3, something Sony will just have to eat at this point. Later on, when their software backward compatibility is complete, expect Sony to take out the hardware for a software-only solution.

At this point, since every Howard, Ken, and Harry own a PS2, our suggestion is for them to cut out BC entirely and chip off $50 from the PS3 price. Please?

Report: PS2 Included with Every PS3 [GameDaily]