its nearly 100% compatible with PS1 games.
Nearly 100%? I thought it was full compatible with PSOne games? You've heard of some not working?
Yes, even though all PS3's have the PS1 hardware, it still has some issues playing games. Now, out of the 1500 or so PS1 games that have been made, a very small number of PS1 games will either not even start, or somewhere along the playthrough the game will no longer progress.
The probability that someone would actually run into a game that wont work, or won't play after a certain sequence is quite remote tho.
PS3s don't have any PS1 hardware at all, it is all done entirely through software emulation. It is relatively straightforward, since PCs have been able to emulate the PS1 since the late 90's.
From what I have seen through firmware updates, that improved upon the emulator, the PS3 probably has far less issues running PS1 games than the PS2...