This article, Revealed: How Xbox One Can Play 360 Games via Backward Compatibility, originally appeared on GameSpot.
Speaking on Giant Bomb's E3 Day One podcast, Spencer said the decision to support Xbox 360 games was made to "make 360 owners look at Xbox One as a safe place to play."
VIDEO: Xbox One Backwards Compatible! E3 2015 [04:30]
"Millions of people made investments in 360 content," he said. "We thought the right thing to do was to make that content go forward, but we didn't know [how difficult it would be]."
"[Emulation] is hard," admitted Spencer, explaining that the company was dealing with having to harmonise PowerPC architecture with x86.
"The approach that we've taken is to actually emulate the full Xbox 360 hardware layer. So the [operating system] for the 360 is actually running when you run the game," Spencer explained.
"If you watch the game's boot you'll see the Xbox 360 boot animation come up. From a performance standpoint it allows [emulation] to work. We're able to get frame by frame performance equivalents."
"[Xbox Live] thinks you're on a 360, so people have been asking 'hey, why are you playing Mass Effect on the 360?,' I was actually playing on the Xbox One."
Spencer continued to explain that, since the Xbox One thinks it's playing a normal game, features such as streaming and screenshots are supported.
"The 360 games think they're running on the 360 OS, which they are. And the 360 OS thinks its 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 a game. That's why things like streaming, game DVR, and screenshots all work, because it thinks there's just one big game called 360."
Delving deeper, Spencer explained exactly how the emulator packages the Xbox 360 games, and how it compares to Xbox 360's emulation of original Xbox games.
"You download a kind of manifest of wrapper for the 360 game, so we can say 'hey, this is actually Banjo, or this is Mass Effect. The emulator runs exactly the same for all the games.
"I was around when we did the original Xbox [backwards compatibility] for Xbox 360 where we had a shim for every game and it just didn't scale very well. This is actually the same emulator running for all of the games. Different games do different things, as we're rolling them out we'll say 'oh maybe we have to tweak the emulator.' But in the end, the emulator is emulating the 360, so it's for everybody."
Asked about whether Microsoft would require permission from game publishers to adjust game code, Spencer clarified it would not be interfering with code.
"The bits are not touched," he said. "There's some caveats, and as always I like to be as transparent as I can be on this: Kinect games won't work from the 360, because translating between the Kinect sensors is almost impossible."
Finally, the subject of multi-disc games was also addressed. According to Spencer, it's an issue engineers are looking into.
"We're still working on multi-disc," he said. "Lost Odyssey and Blue Dragon are some of my favourites from the 360. There's actually work in packing a multi-disc into single that requires us to go back and look at the original package on the multiple discs and reconfigure that."
Microsoft announced Xbox One backwards compatibility with Xbox 360 games at its E3 press conference. According to the platform holder digital Xbox 360 titles already purchased via XBLA, as well as retail discs of last-gen titles, will eventually be "natively" playable on Xbox One.