So it's going to be like the X-Box 360 with backwards compatibility. A few games at first as a test (glad to see Mass Effect in there) and they will add games over time. Eventually, pretty much every game will be playable.
No, it'll be a lot better than it was on the 360. On the 360 it was done on a game-by-game basis and was a giant pain in the ass for everyone involved (MS/developers/publishers), resulting in glitchy games and a spotty library.
This time, MS has just emulated the entire 360 OS on the One, so the bulk of the work is already done. All they'll really need now from publishers is approval, so most games will be able to carry over no problem. The only ones that definitely won't carry over are games that require Kinect or other hardware, like Rock Band.
Speaking of Mass Effect, it actually runs better on the One than it did on the 360