The Palm PRE may not be beating the iPhone in terms of sales, but it is winning the hearts of old-school gamers all over the earth: Awesome Pre programmers have created a PlayStation One emulator for the machine, as well as a version of MAME (Multi Arcade Machine Emulator) so you'll be able play Contra all day, and then follow it up with a rousing game of Crazy Climber.
Zodttd is the genius behind the PlayStation emulator, and Nebula created the MAME program. Both are a bit rough around the edges. Sound, rotation, and scaling aren't quite working in the PlayStation emulator and the MAME machine has some sound issues, but, judging from the obligatory YouTube videos (embedded below the cut), the emulators are more than a little awesome, bugs and all.
Oh, and of course you'll need to jailbreak your Pre before these will work, and you'll need your phone rooted to your computer, but, I think it's only a matter of time until both are playable (and perfect) on the fly -- both the technology and the desire are in place, so there's no reason it won't happen.
What older system would you most like to see emulated in handheld phone form? I'm holding out for an N64 emulator, or, to go really, really old-school, a TRS-80 imitator.