Sony Computer Entertainment corporate executive Izumi Kawanishi shared some insights today in a report titled "PSP will become a virtual PS3." The article goes over emulating PS1 games on the handheld, and the obvious difficulties in translating some games that involve using more than one analog stick and use more shoulder buttons. According to Sony, emulation was always technically possible, but only now is the broadband penetration high enough to warrant 600MB downloads for players. "We felt that there was now an environment where true e-Distribution could be realized."
It appears that e-distribution of games is a high-priority for Sony. Services like Steam (PC) are becoming more and more popular with users and publishers, and Sony understands the appeal for many of us. Downloadable demos will be a continued trend for all kinds of games: PS3, PSP and PS1. Also, it was confirmed that you will not need a PS3 to download content to your PSP (for those that were worried).
But the future of digital distribution doesn't stop there: "Distributed content won't be limited just to games. It will also likely include movies. While we can't get a grasp for how well UMD movie software is selling, there's no question that the world is moving in the direction of network distribution for movies. I've heard that So-Net's Portable TV is performing well."
"PS3 video can be viewed as is on the PSP, so the PSP becomes like a Virtual PS3." Similar to how Location Free Player works, you'll be able to view PS3 content on your handheld. But that doesn't mean music, photos and videos. It means games as well (although games that require fast reflexes will most likely not work due to network latency).
Sony's developers still aren't done working on the system, and are still implementing new features: "It depends on what the users want... It already has a Web Browser, and along those lines, schedule management and mailer applications will likely appear. However, it's important that the concept not lose focus. It would be troubling to have it become a machine whose use is unknown."
Where might Sony end up taking the PSP? It might turn the system into a psuedo-cell phone: "I'm interested in it [turning PSP into a phone]. Of course, it's not the case that you can connect to wireless LAN everywhere, so you can't call it a permanent connection. But cell phones are permanently connected. Cell phones get more interesting as their data transfer rate increases, and I think it would be extremely interesting to try something like that."