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: