The are many differences between the models the big ones are:
The 20 GB does not have WiFi
The 4 USB port PS3 models play PS2 games the ones with 2 USB ports do not
The First PS2 20 GB and 60 GB USA model had the best PS2 game capability
The Slim Models run cooler and have HDMI Sync and have larger harddrives
Harddrives are available in the 160 GB and 320 GB for the PS3 and the prices are now only $249.99 and $299.99 September 12 2011. But with the Infamous 2 game free with the 320 GB model Sony is saying get the PS3 320 GB and get a free $50 game or you can buy the 320 GB PS3 with Move Bundle for $349.99.
Software updates allow all models to play 3D with 3D HDTV or Use the PS3 Move with the Move Bundle or Download Netflix Movies with internet connection
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with new models like the slim the answer is no but with the older models yes you can for more information look at the playstation 3 article on wikipedia
yes with the first generation of ps3 models
All PS3 models play PlayStation 1 Games and do so through software emulation.
Only some models of the ps3 have the capability of playing ps2 games.
No, they cannot. But you can play PlayStation 1 games on a PS2, and PS2 games on a PS3 (but on later models, the PS3 cannot play them).