Gameindustry.biz adds confirmation to what has been suspected for some time, as the hardware and component details have been reveled - XBox 2 will not be compatible with Xbox 1 games.
This sounds like Microsoft is shooting itself to the leg, and is executing the opposite of Sony's strategy with the Playstation. One of the key factors of the success of the Playstation series is that the older games remain playable with the next generation console. According to Sony, the PS3 will support PSOne and PS2, possibly extending the product life cycle of PSOne technology to the third decade!
Speculation about the backwards compatibility functionality has been rife since it emerged that Xbox 2 - codenamed Xenon - will have radically different hardware to the original system, with a non-x86 processor, no hard drive and an ATI, rather than NVIDIA, graphics chipset, all of which would make running Xbox titles on the platform very difficult.Source: Gameindustry.biz
GamesIndustry.biz has now learned that Microsoft does not plan to provide any backwards compatibility in the next-generation Xenon platform - and indeed, that senior executives at the company don't believe backwards compatibility to be an important feature for consoles.