It looks like EU users will be getting a combination of software and hardware emulation for psone and ps2 games. There will be a compatibility list with updates for games that don’t work, similar to how the XBOX 360 works. What this means is there will limited number of psone and ps2 games that will be compatible with the ps3.
http://www.scee.presscentre.com/Content/Detail.asp?ReleaseID=4331&NewsAreaID=2
http://gamesindustry.biz/content_page.php?aid=23003