There’s been a lot of discussion ever since the E3 announcement a few weeks back regarding how, exactly, Microsoft was able to get Xbox 360 games working on the Xbox One.

So much so, in fact, that we’ve decided to post a video from the folks at Giant Bomb from the week of E3 in order to answer the question once and for all. The clip features Phil Spencer and Kudo Tsunoda from Xbox, and Giant Bomb‘s Jeff Gertsmann asks the pair directly about how the Xbox One can play Xbox 360 games. It starts at around the three hour seven minute mark.

I’ve transcribed the important bits. It comes from Phil Spencer.

“[Emulating Xbox 360 games on the Xbox One] is hard, and it was our decision on the leadership team to make the investment…

…The approach that we’ve taken is to actually emulate the full…Xbox 360 hardware layer. So the OS for the 360 is actually running when you run the game. And if you watch the games boot right now, you’ll see, actually, the Xbox 360 boot animation come up…

…Live thinks you’re on 360…The 360 games think they’re running on the 360 OS, which they are, and the 360 OS thinks it’s running on the hardware, which it’s not. It’s running on an emulated VM.

On the other side, the Xbox One thinks it’s game. That’s why things like streaming and game DVR and screenshots all work… It thinks there’s one big game called ‘the 360.’”

This is an emulator that runs exactly the same for all games. They may tweak the emulator to perform better if one particular game stresses it in a certain way, but that’s a console wide tweak.

That means that all publishers need to do is give the greenlight for 360 games to run on the Xbox One. There’s no in-game re-coding that has to happen. It’s pure emulation.

Spencer did say that Kinect stuff will not work, because the inputs are totally different. He also indicated that they’re having some trouble with multi-disc games, so he’s hoping they’ll be able to fix that down the line.

When you pop in a 360 game on your Xbox One later this year, you’ll have to download, basically, a wrapper that tells the Xbox One which 360 game it is. That’s it.

Pretty nifty, right?