The phone would have Android 3.0 on board and the Android Market will host games for the device in a special area that will only be accessible by this model. Eventually, other units might be allowed to download the games as long as game requirements are met. The library of titles are said to include older PSX games mixed with some new PSP titles. A release as soon as October is possible.
A device like this would be a win-win for all those involved. For Google, it would be a chance for Android to make some strides against the strong gaming capabilities of the iPhone/iPod and Sony Ericsson would get a shot at delivering a relevant, up-to-date Xperia model in the U.S. market, something that the joint venture has been unable to accomplish up to now.
source: Engadget via AndroidandMe