Sony has cut the price of the last-gen Playstation 2 console to $99 in North America. Speculation about the reasons for a price cut has left most with one conclusion: Sony has decided that the PS2 is the main competitor for Wii console, not the PS3.

Joystiq fans the flames with this blog post, where they suggest the PS2 and the Wii have similar gamers and they are technologically closer than the Wii and their HD competitors.

Many have argued that the Wii is not a next-gen console, but is in fact a more technologically advanced version of the previous generation’s consoles. Many game developers have shunned the Wii for this very reason. Has Sony essentially look on the Wii as the same thing?

The conclusion makes sense considering the PS2’s continued hot sales. But to rank the PS2 and the Wii in the same generation makes little sense, considering that the PS2 has limited 480p ability as compared to the Wii, as well as the lack of a motion system and paltry downloadable content. What it lacks in firepower it makes up for in the PS2’s extensive game library.

The conclusion also makes sense from a standpoint that PS3 gave up on backwards compatibility. Sony tried and tried to sell a more expensive console that had backwards compatibility, but the PS2 and the Wii kept selling at a higher volume. They could produce PS2s much cheaper than PS3s so they decided to split the price different and use the PS2 to cut into the Wii’s market share and instead focus the PS3’s efforts on the XBox. I see Sony saying little for or against the Wii lately, likely for this reason.

The gaming market continues to become more dynamic. We’ve never had a market where the line between the last generation and the next has become skewed until now. What does this hold in store for the future?