Suggestion:
backward compatibility for the PS3 with PS2 games is as follows on NTSC systems:
20GB (4 USB slots, fat, no longer in production) – YES
60GB (4 USB slots, fat, no longer in production) – YES
80GB with 4 USB slots (fat, no longer in production, bundled with MGS4 or Motor Storm) – YES
40GB (2 USB slots, fat, no longer in production) – NO
80GB with 2 USB slots (fat, no longer in production) – NO
160GB (2 USB slots, fat, no longer in production) – NO
120GB/slim (2 USB slots) – NO
250GB/slim (2 USB slots) – NO
any other up coming PS3's – NO
PAL systems only have one backwards compatible system, and that's the 60GB.
THAT'S 4 SYSTEMS THAT ARE IN FACT COMPATIBLE WITH PS2 GAMES!!! NOT 1 SYSTEM, NOT 2, 4!!!
in short: if it has 4 USB slots, yes. if it has 2 USB slots, no.
and as you can see, there are 3 systems that are fat, but can NOT play PS2 games. just because the system is fat does NOT mean it can play PS2 games.
all PS3s play PS1 games.
http://en.wikipedia.org/wiki/PlayStation_3#Model_comparison
the download that others are referring to is for the PS3s that already are backwards compatible. downloading it to a non-backwards compatible PS3 will do NOTHING but take up space on your hard drive! it will NOT make your PS3 play PS2 games!!!
"If a PLAYSTATION 3 is not backward compatible, you will not be able to add this function through any hardware (i.e., changing the hard disk drive) or software (i.e., updates, homebrew) upgrades or modifications. "
that came DIRECTLY from Sony's own website: http://playstation.custhelp.com/cgi-bin/playstation.cfg/php/enduser/std_adp.php?p_faqid=232&p_sid=1P9bCDwj
and no, not all PS2 games or PS1 games will work. the 20GB and 60GB come the closest to being fully backwards compatible with PS2 games, but they still do not play 100% of those games or PS1 games. if you buy a backwards compatible PS3 and want to know which of your PS2 games work, check this link: http://www.us.playstation.com/Support/CompatibleStatus
I dare anyone to steal my answer again. this is MY answer. I took the time to type this all up. yes, every time someone asks this question, I do copy and paste. but I'm copying MY work, MY answer.

{ 4 comments… read them below or add one }
No. The 120GB does not play any PS2 games.
There have been eight PS3 consoles so far, of those only three have been able to play PS2 games. All three backwards compatible PS3's are now out of production, and can mostly only be bought second-hand/refurbished.
The PS3's which can play PS2 games are:
20GB (no wifi)
60GB
80GB ( older one that had four USB ports and came in a bundle with MGS4 or Motorstorm)
The PS3's which do NOT play any PS2 games are:
40GB
80GB (newer one with 2 USB ports that you can still buy new in the shops)
160GB
120GB Slim
250GB Slim
Are there any side effects?
Backwards compatible PS3's do not play all PS2 games perfectly, you may find that some are a bit glitchy, but they will not do any harm to a PS3. The BC 80GB with four USB ports, is only 80% BC, so there are some PS2 games that it won't play at all, but it will play most of them.
Overall, I would say that a PS2 is the best thing to play PS2 games on, and that second hand BC PS3's, are a bit of a risk, because they are quite expensive, and you don't know if they have been looked after well, or refurbished properly, a second hand one, probably won't last as long as a new one would.
I recommend that you keep your PS2 for PS2 games, and get a PS3 for PS3 games. It's cheaper and more reliable that way, and it isn't really that much trouble to have both consoles under your TV:)
Edit: PAL systems are region 2 (UK) All three backwards compatible PS3's were availble in the UK, region 2 PAL, my answer was not copied, it is information that I have from first hand experiance, and anyone is most welcome to copy it, in order to answer a question and help someone:)
I believe it can, but it is possible that you might run the risk of doing something bad to your PS3, but I would still try at least seeing if it shows up under the games section and has the disc logo beside it.
the original 60gb ps3 and the20gb are both backward compatible meaning you can play all of the ps1 and ps2 games.check out this link.
no a PS3 System with 80GB HD 4USB (Gamestop Refurbished) – $299.99 can though
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