Sony isn't blind to it, it's technically impossible without recompiling the games.  Sony knows this and has mentioned it.  They did mention that you'll be able to stream PS3 games via Gaikai, they just either haven't given enough info or they mentioned you'll have to start from scratch.  So come E3 hopefully more will be clarified.  Will you have to purchase your games again to run them with Gaikai?  Will download titles only run via Gaikai?  Can I upload my saves to Gaikai?  No one knows the answer to this.  I personally think the rumour about PS++ is true and Sony is trying to weigh in charging yearly for BC via Gaikai.  If Gaikai can read the disc in my PS4 and let me stream it from their servers then I may pay an extra fee for it to put my PS3 to rest.  If it's PSN titles only with an extra fee then that'll weigh in heavily on how early I buy my PS4.  Best case scenario is that their patent on running old hardware on new hardware via a "BC Box" or whatever they called it in the patent is true and I can buy hardware attachments.

The thing is right now PSN does link purchases to account and not hardware. The ability to play archives between PSP, PS3, and PSV is one of Sony's greatest accomplishments this generation, and a disappointment from the Nintendo online side.

Unfortunately the removal of Cell will make PS3 games not run without emulation, and emulation of Cell is just as difficult, if not moreso, as emulation of PS2's Emotion engine. Sony's biggest flaw could be said that they have a terrible habit of changing their processor architecture every generation, so games from the previous generation have to be recoded. Hopefully with x86 they will stick with it, although if Gaikai takes off there might not be such a need.

just release the PC version of the games , and problem is solved.

Considering everything, I prefer to have a PS4 that can't play PS3 games but will give me NEW GAMES that come out sooner, are higher quality and easy to port than a PS4 with BC with all the issues the PS3 experienced with bad ports, delayed games, cancelled games etc etc etc etc. Next gen is about new experiences and I don't see why BC is such an issue, especially after a year or so into the console's life.

Personally I think Sony made the best choice given their options and the fact they've been getting so much praise from developers only suggests we will benefit from this too. It's one of the reasons why we'll probably have a great PS4 launch with great games later in the year.

And as somebody said ... you guys are acting as if every PS3 is about to blow up soon. o_O Just keep both, or get a PS3 later. They'll be cheaper.

"who needs backwards compatability?" said no playstation owner ever... until a week ago

Well, I think it's a given that PS4 will have at least PS1 BC. I would imagine it would have to be because of the Classic collection. Making it PS2 BC would be wise, also, since it would save them time and money not having to build stand alone emulators for each PS2 game.

I think it was obvious it wouldn't play PS3/PSN games, though, as that would have added extra costs, probably pushing the console to $499-$599. Sony doesn't want to launch the PS4 at the same price as the PS3, as it would have to wait a year or 2 (after it could drop down to $299-$399) before sales would really take off. Of course, I imagine Minis will still work, as those are running in an emulated environment, already. Simpler game's code can probably be slightly retooled to work on the PS4. However, most games are probably just going to be run through Gaikai, so not really a big deal.

You're looking at it from the wrong perspective. People don't care about the technology behind the issues, they care about the problems they create for the end-user.

The two complaints you mentioned are the Cell's difficulty to develop for, and lack of backwards compatability. Both are legitimate complaints.

Hopefully, Sony should at least make PSN/MInis/PSOne classics playable since. PS3 games is understandable, but the PS4 could probably handle emulating the PS3 enough to run the PSOnes/minis/PSN games and stuff.

Not PSN games, just PSone, PS2, and Minis.

All PSN games are PS3 games. Coded for Cell, running on Cell. There may be some publishers/developers that will port their titles over, but I doubt it will be a large number, especially with Gaikai cloud solution coming in the future.

EDIT: this will be the last scar for Sony from the Cell. It is time for healing and the future.

I was thinking more of the little PSN titles actually like sound shapes. The vita can run it, though probalby down graded, the PS4 probably has enough under the hood to emulate the cell to run these little titles.