It's probably only legally questionable to rip the disc image. Putting it on your own Xperia would be OK as would having the emulator software on your phone. It may be illegal for Lu to distribute the emulator software though. If Sony don't ban Lu from distributing the emulator then that's tacit approval for people to do the rest of what it takes to play the PS1 games. If I was Sony I'd do a deal with Lu and take a % of each sale of the emulator.
Sony mostly want to sell the phone and having this emulator only helps the sales potential of the phone.
“The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.” - Bertrand Russell
"When the power of love overcomes the love of power, the world will know peace."
Jimi Hendrix
