The Playstation CEO Jim Ryan said in an interview with the Washington Post. He said that 99% of the PS4 games should work fine on the PS5. PS5 cannot play PS1, PS2 or PS3 games due to CPU incompatibility.
Given Xbox claims backwards compatibility all the way back. It should be interesting to see how well Xbox 360 games run with the emulator. The Xbox 360 CPU is not x86 compatible.
Both Xbox and PS5 consoles with BD drives are needed for compatibility with existing game disks. The diskless models are download only.
Supporting game disks has been a headache for the console peasant due to the various CPU choices. The current generation and upcoming generation will be the most compatible with Full HD and 4K UHD televisions.