I have to take issue with the part in this article comparing the hardware to a PC. 1gb of RAM might seem pretty low but it's still double the Xbox 360's ram. The Tegra 3 might not be quite as powerful as the Xbox 360's processor...but consider this. Ouya will be more powerful than the iPad 2 (I compare it to the iPad 2 because that's the one I have). iPad 2 has a processor on par with the Tegra 2 and has 512 mb ram. The article in fact says the hardware is comparable to that of the iPad 3.
What will Ouya games look like?
Since Ouya is more powerful than the iPad 2, it's safe to say that games on the Ouya will be able to look as good, and better than those on the iPad 2.
Here's what Shadowgun and Infinity Blade 2 look like on the iPad 2...
To put things in perspective, the Ouya is more powerful (by a longshot) than the original Xbox. We had Halo 1 and 2 and hundreds of other "core" games running on hardware inferior to that of the Ouya.
And with Ouya being completely hackable, there's no doubt that there will be emulators running on it sooner or later. Being able to play the entire NES, SNES, N64, etc. libraries on one tiny little console anyone?