The current production models (80gb or 160gb) are no longer compatible with PS2 games.
When the 80gb model first came out, it had software emulator for running PS2 games. The took the emulator out during the last model change in the fall. One way to see if a particular PS3 is compatible with PS2 games is to check the number of USB port it has - if it has 4 then it is at least partially compatible, if it has 2 then it is not.