The latest rumor making the rounds is that the PlayStation 3 will actually contain a hybrid Emotion Engine and Graphics Synthesizer chipset, currently in the slim PlayStation 2. The reasoning behind this move is for the backwards compatibility functionality in the PlayStation 3. According to Japan's Ultra One monthly technology magazine, Sony will be emulating PlayStation 2 games initially via a hardware solution as their software emulation will not be ready in time for the PlayStation 3 launch.

Sony will be achieving backwards compatibility on the PlayStation 3 not through software emulation, as previously announced, but through physical hardware. Of course, including the extra hardware drives up costs. The magazine adds that Sony plans on removing the PS2 chipset from future revisions of the PS3 hardware once it has finished development of a proper software-based PS2 emulator. Such a removal would help bring down costs for the system.

In addition, the magazine reports that the PlayStation 3 will feature a large amount of flash memory to store the console's operating system; therefore, the hard drive will be able to be transfered from one system to another or with a new off the shelf 2.5" notebook hard drive.

Sony Bundles PS2 With PS3 [IGN]