The reasons are commercial, not technical. It won't happen.

I can't disagree with you more.

Emulation is absolutely necessary as a going forward effort for Microsoft if it wants to offer backward compatibility.  

How are Sony or Microsoft going to offer an online service like PlayStation Now (Gaikai) without emulation?  A data center full of PS3s or Xbox 360's?  No.  It's proposterous.  The long-term viability of that type of service would be impossible to predict because the failure rate and supply vs. demand for the service.   Your hardware doesn't last forever and the supply of it is decreasing against the potential for a high demand.  You have to emulate.

Whether or not Microsoft offers consumers an Xbox or Xbox 360 emulator is an interesting question, but an Xbox 360 emulator is financially imparative to Microsoft so that it can not only offer a service like PlayStation Now, but it can do so without a 1:1 ratio of hardware to user.  With emulation Microsoft would be able to serve more than one user to a server, subsequently driving down the cost of the service, while ensuring the supply meets demand.  As well, there is no question as to whether or not the hardware will be available three, five, ten, or twenty years down the road.  The emulator exists and as long as it's maintained to be compatible with existing hardware the emulator will exist.

I know you or someone else will suggest recompiling software, but that's often an impossibility with developers going out of business or source code going missing.  While Sony or Microsoft could ask a a developer/publisher to reissue a version for them that provides a console overlay, so a PC game looks like it's running on the respective console, that's an expensive task as well as not always possible. 

While I would personally like local emulation, rather than through a service, I firmly believe emulation is absolutely necessary for both Microsoft and Sony.  Especially when you consider they only have a few years before their respective consoles won't be available.  Yes, I'm aware that they'll still have the ability to produce them, but the cost of manufacturing them will make them profoundly more expensive than they currently are.  

Come on, bro. Seriously, Gaikai is proving itself to be the safer route with the cloud right now for gaming emulation. Theres no other direction its going to go this gen once Sony proves its value.

Sony made special ps3 server boards which would be able to handle many users on one card. MS would have to do something similar. They arn't going to store millions of ps3 around the world for a streaming service, they would never make any money that way. 

Not to take this topic off track, but if anyone from the Sony camp is interested:

PS3 Emulator: http://www.sonyps3emulator.com/system-requirements/

Would be interested to hear how well it work.

Don't be posting sites that have malware in them ...

i remember reading an article about sony making special servers with ps3 parts for gaikai, ill see if i can find that again..

http://www.eurogamer.net/articles/digitalfoundry-2014-sony-creates-custom-ps3-for-playstation-now

Sony has developed brand new PS3 hardware to power its PlayStation Now streaming service, revealed earlier this month at CES in Las Vegas. Sources who have been briefed on the project suggest that the new PlayStation 3 consists of eight custom console units built into a single rack server. It's the new PlayStation hardware that everyone will have access to, but few will actually see.

more at link

You still have the problem of specialized hardware that ultimately is going to cease production.

IBM has ceased production of the Cell processor.  Sony has the capability to manufacture the Cell 8i processor on their own, but with diminishing returns.  The further out, the more expensive it gets.  

Likewise, you're still dealing with limited user to hardware ration.  Let's say you're capable of getting three PS3's to one 1U "server" via physical hardware.  You're still dealing with essentially 3 users to 3 consoles.  You're just sticking it into a smaller package.

Emulation allows you to have a data center with 300,000 servers, and at a moments notice take one that's not being used and have it automatically turn-up to offer that specific hardware/software capability.  So let's say I can still only operate 3 PS3s to one 1U server.  I may still have the same limitation, but if I have another server with PS3 VMs installed on it, I can instantly turn those up so they function as PS3s.   And if I happen to a 2U or 4U server with more processors and more memory, I can easily support more VMs and more users.

Emulation, by means of virtualization, is the most logical, rational, and financially viable long-term option for offering backward compatibility.  Either locally, or via an online service like PlayStation Now.

An online service just allows a company like Sony or Microsoft to montenize it.

It would have been nice if they said the server size.  I'm guessing a blade server design then.  8 blades in a 9U space roughly.

Did you actually get a malware alert?

I didn't get any.

http://www.siteadvisor.com/sites/cleanfiles.net