It is fully Game Boy Advance compatible (it has a slot for the carts), and has a DS cart slot to take advantage of the new dual screen features as well.

ENGADGET: Live from E3: Day Two

It doesn't take much imagination to look down the road and see an Xbox 2 three or four years out, one that's fully compatible with older games but can also double as a DVD player-recorder and, with the addition of a big hard drive, a personal video recorder.

FORBES: Magazine Article