PS3 Internal Memory Cards for Backwards Compatibility Hands-on
November 10, 2006 - To save PlayStation 2 or PSone games on the PlayStation 3, you'll need to create a Internal Memory Card for that system. By heading into the Game heading in the Cross Media Bar, you'll find an option entitled Memory Card Utility. You can then create both PSone and PS2 memory cards, give them a name and assign the slot that they're assigned to.
The Internal Memory Cards carry the same storage space as the official Sony cards for each system, so 15 blocks for PSone games and roughly 8MB for PS2 titles. You can create as many cards as you'd like, so while you may need to virtually swap cards before you switch games, you should never run out of storage space.
The PlayStation 3's Virtual Memory Card support directly mimics a PlayStation 2 to the T, meaning that you can only have two Memory Cards inserted at any one time, though you can assign which Internal Memory Cards go in which slot. So, you can't have a PSone card in the first Memory Card slot and then expect have a PS2 game save to it.
Thanks to http://ps3.ign.com/articles/745/745241p1.html for sharing the news with us!