Microsoft has made a licensing agreement with NVIDIA to make the Xbox 360 compatible with Xbox games. The deal means NVIDIA will get paid over several years, even though they don't provide any chips for the Xbox 360 console.
Microsoft needed this agreement to emulate NVIDIA-licensed technologies found in the first Xbox console to give the new Xbox 360 console backwards-compatibility with the old games. The company also needs to emulate the 733MHz Pentium processor from Intel but this is reported as an easy task since the new console has three 3GHz IBM PowerPC processors making the emulation process rather simple.
The real bottlenecks in the emulation are GPU calls - calls made specifically by games to the Nvidia hardware in a certain way,” ATI European Developer Relations Manager Richard Huddy said in an interview with Bit-Tech web-site recently.