A new console running an older generation's games is doing one of several quite different things. Which method is used explains why some libraries transfer completely and others barely at all.
Shared architecture makes it almost free
When a new console uses the same processor family and graphics architecture as its predecessor, old code can execute more or less directly.
The remaining work is compatibility in the system software: reproducing the older operating system's behaviour and handling differences in storage and controllers.
This is why generations that kept an architecture delivered broad compatibility quickly, while generations that switched processor families struggled or gave up.
Emulation reinterprets instructions in software
Where architectures differ, the new machine must translate the old machine's instructions as it runs. That translation costs performance, sometimes by a large factor.
Emulating a console is harder than emulating a general computer, because games interact directly with specific hardware behaviour rather than through an operating system.
Timing is the persistent problem. Games written against exact hardware timings can break subtly when the timing is approximated, producing faults that only appear in one section.
Recompilation converts the game once
Instead of translating during play, a platform can convert an old game's code ahead of time and ship the result. Performance is much better than emulation.
The cost is that each title is handled individually, requiring testing and sometimes fixes. Libraries supported this way are curated lists rather than whole catalogues.
This is why compatibility announcements often arrive as batches of titles. Each batch is finished work rather than a switch being flipped.
Rights are as limiting as technology
Games contain licensed music, sports likenesses, film properties and third-party middleware, all under agreements with terms and expiry dates.
Making an old game available on new hardware can require renegotiating those agreements, and the rights holder may no longer exist or may decline.
Titles that vanish from compatibility lists usually do so for this reason rather than a technical one. Nothing about the code changed.
Compatibility changes the value of a library
A player deciding between platforms weighs what they already own. Carrying a library forward reduces the cost of staying and raises the cost of switching.
Platform holders therefore treat compatibility as a retention feature, which explains why investment in it rose once digital purchases became the norm.
A physical disc could always be kept and replayed on old hardware. A digital library cannot, so its portability became something the platform must actively provide.