"Thanks to a number of analyst reports, it looks as if we finally have some more information on the 360's backwards compatibility and launch price point. Just like the original Xbox, it appears the 360 will come with a $299 price tag. The 360 should also be able to play the majority of the Xbox library, but Microsoft will have to pay Nvidia as a result.

Prior to the Xbox 360's unveiling, the issue of backwards compatibility wasn't even something Microsoft would discuss. However, when Microsoft finally announced that its next-gen console would feature backwards compatibility with 'top selling' games, it seemed to confuse people, not excite them.

What exactly does 'top selling' mean? Which games will work? How will the Xbox 360 play Xbox titles? None of these questions has been addressed specifically by Microsoft yet. When we sat down with Peter Moore, as hard as we tried we couldn't pry any substantial info on the topic out of him. 'You don't need to know the technical details. What you need to know is that the top-selling games will work, and as we plow through them all over the next few months, we will start telling you which games,' he told us at E3.

Nvidia raking in the $$ from Sony and MS
Some details have trickled out, though, courtesy of Wedbush Morgan Securities analyst Michael Pachter. In a recent research note, Pachter confirms that Microsoft "has agreed to pay a small royalty to Nvidia to allow the Xbox 360's ATI chipset to emulate the performance of the Nvidia chipset in reading certain Xbox games." Nvidia, therefore, will not only be receiving royalties from its partnership with Sony for the PS3, but it will also still get small payments from Microsoft for every 360 despite the fact that Nvidia is no longer the GPU provider.

Some "patches" may be necessary
Apparently, for Xbox games that are written in a single layer (which MS management believes to be most of the Xbox library) the emulation should be pretty smooth. The smaller percentage of Xbox titles that are written in multiple layers will require "patches" (separate emulation programs) in order to work. Pachter says that Microsoft currently plans to sell the 360 with these patches already pre-loaded on the included 20GB hard drive. It is also conceivable that any additional patches for other Xbox games could be easily downloaded over Xbox Live.

Therefore, taking this information at face value, consumers can expect the vast majority of Xbox games to be playable on the 360. "We presume that the majority of Xbox games will be backward compatible, and the company assured us that it intends to add patches should consumer demand warrant such action," notes Pachter."