Sorry Mike, but Steve is correct. The 'compatibility chip' you mention only refers to the Emotion Engine. The Graphics Synthesiser from the PS2 has been fitted on ALL models of PS3, until now. That is the reason that backwards compatibility is now gone.

Thanks Graham. Mike and Van, don't try to correct someone when you don't know what you are talking about. Direct from SONY:

"The 60GB model launched in Europe was a new model (shared with the 80GB model launched subsequently in USA) which contains only a modified version of the Graphics Synthesiser chip from the PS2 and not the Emotion Engine chip. The European launch model therefore used a combination of software and the modified version of the PS2 Graphics Synthesiser chip to deliver backwards compatibility for PS2 titles.

The 40GB model, to be launched in Europe on 10th October, is a new model and is not equipped with any of the semi conductors from the PS2, and backwards compatibility would therefore have to be achieved by software emulation alone."

More confirmation:

http://www.threespeech.com/blog/?p=293
http://www.beyond3d.com/content/news/151
http://pc.watch.impress.co.jp/docs/2007/0314/kaigai344.htm

GS was STILL in the PAL 60GB and NTSC 80GB. Enough said. :)

*quote* "Umm, the PAL 60GB and 80GB PS3s still have the PS2 GPU in there, so it's not all software." *quote*

That is not true Steve. Sony announced before the European release that, in order to save money on the PS3 BOM they would not be including the PS2 compatibility chip and would instead handle backwards compatibility through software emulation. The North American PS3 still has the chip.

Mike

Steve sorry but you're wrong. The PAL PS3 never had the EE or GPU from the PS2. Only NTSC 20GB-60GB PS3 had them. ALL the PAL BC of the PS3 was done by sofware.
Cheers

"Considering SCEE PS3s have backwards compatibility implemented by software, this seems a strange choice."

Umm, the PAL 60GB and 80GB PS3s still have the PS2 GPU in there, so it's not all software. The reason why the 40GB doesn't have PS2 BC is that they took the GPU out, so now it has no PS2 hardware at all. Their current emulation solution only emulates the Emotion Engine (CPU). For them to get BC to work on the 40GB models, Sony will need to write an emulator that emulates the GPU as well.