The rumors I have heard is that it will be ps3 compatible, but undefined for previous generations.
On that note I have heard rumors that the new xbox will not be backward compatible with either the xbox or 360.. but I don't really think I would believe that, it seems like a stupid move to not allow it.
Download only games would allow for steam to keep track of cheaters as they do on the pc.. and you wouldn't have to worry about losing disks as they would be available to you anytime just via download.
And sony did acquire Gaikai Cloud, which is a cloud based server system that essentially lets you stream games over an internet connection meaning the game wouldn't necessarily need to be installed in the hard drive to be played.
But its still a new concept really, streaming these high performance games vs playing off a physical library on your system. I think they will test the waters and then eventually move towards it later if it receives good marks.
As far as what games will look like, at first they will look very similar to games out now, but I would expect 3D gaming to come out more with this release