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Looks like Sony just spiked Microsoft's Gun - the PS3 is fully backwards compatible with previous playstation games, supports up to 7 controllers wirelessly via bluetooth 2, does away with expensive proprietry memory cards in favour of industry standard SD/Memory Stick Duo/Compactflash cards, will accept an additional 2.5" HDD for downloadable content etc, sports dual HDMI ports as well as the standard Playstation Audio/Video Connector, and supports full HDTV up to 1080p.
Games are apparently much easier to code than the previous Playstations, so should prevent the headaches that gave coders nightmares before..
Of course, it's now down to availability, price, and the quality of games, but with the upgrade path for the millions of existing PS2 owners smoothed over with full backwards compatibility (Leaving the XBOX 360 the only one of the "next-gen" consoles that isn't compatible with previous generations..), it looks like Microsoft's plans for world domination just got a LOT harder.