Actually, there are many versions of the PS3, the first generation could play PS1 and PS2 games with true hardware emulation (just put the game in and you're done).
The 2nd generation models can play it with software emulation, you just have to buy the program through the sony store, but the performance/visuals are not as good as the original PS3's that played them with true hardware emulation.
3rd and 4th generations have no backwards support from what I can see. There might be some homebrew software out there you never know. (try zophar maybe?)
http://en.wikipedia.org/wiki/Playstation_3