Generally speaking, something new is said to be backward compatible when it has the ability to peform the same action/task which was designed for something older.
Windows NT/2000/XP do not use system.ini and win.ini files that were used by previous operating system versions. Instead they use IniFileMapping which places the same information (contained in these physical .ini files) into Windows Registry subkeys. The pertient keys in the registry are then used to read any .ini mappings from that location as opposed to older versions where the actual .ini files were read directly.
If you open an actual system.ini file, you may see something like this:
; for 16-bit app support
With IniFileMapping, each line from this file would be located in a separate .ini subkey in the registry.
See How .ini Files Are Mapped to the Registry
and Use IniFileMapping
Backword compatibility would mean that the newer versions of Windows would have the ability to use system.ini and win.ini files in the same way they were used in prior versions. Since this is not the case, as the newer versions use a different feature (IniFileMapping), they are not considered "backwards compatible". To better understand the concept of Backward compatibility, read here
In order to fully understand all this, you need an understanding of the Windows Registry and the operating system itself.Understanding the RegistryDemystifying the Windows Registry