As a budding programmer myself, I can see improvments in graphics, but the biggest improvement will be in processor speed, where not just graphics but the calculations that are performed to produce gameplay are made. This will open up completely new possibilities in gaming. I can't think of an example right now, but that's what's comming up. Also, you'd need more RAM for higher quality textures, faster BUS speeds, and maybe a bigger disk medium, but those have all been standard upgrades so far.
And now that I think about the PS3 having Cell technology and how developers won't be able to do multiplatform with the PS3, wouldn't that make it hard for Sony to have it be backwards compatible for the PSX and PS2?