Backwards compatibility helps to encourage brand loyalty. If you own 50 games from console Y than can be played on new console X but not new console Z, and both console X and console Z are very similar in all other respects, which will you buy?
Backwards compatibility becomes less important depending on how new consoles differentiate from each other via other means (notable exclusive titles or other exclusive features/services), and depending on whether new consoles are able to retain consumers through other features that carry over from one platform to the next (Trophies/Achievements, etc.).
Same thing happens with mobile phones. People bought iPhones when they first came out, and the amount of purchases made through the App store encourage a certain level of consumer loyalty. Some still transition from iPhone to Android and vice versus after heavily investing in one platform or the other, but it's less common than it would be if such investments had never been made.
Edit:
This guy is a pretty classic example:
| 720, I have too many achievements and am to loyal to halo to switch now |
Prominent Xbox features are enticing him to buy the next Xbox. Now, achievements alone would probably encourage him to stick with MIcrosoft going into next gen, assuming their prospective line up even remotely matches what he has come to expect from an Xbox console, but let's take it to an extreme and imagine a scenario in which Microsoft decided to forgo the Halo franchise in favor of new IPs (lol). Legacy support for Halo Reach and 4 and their online communities would provide him with an incentive to buy a new Xbox over a new PlayStation in leiu of a completely new Halo.
