Actually, Lefteris_D, most game console companies make hardly any money on the hardware. They often even lose money on them (Microsoft loses money on each X-Box they sell).
But there's no point in them making an emulator for the consoles because it would make the console obsolete, which would in turn make the need for a console obsolete, which would in turn cause the entire console game industry turn to solely making PC games. The reason they make their own proprietary hardware systems is that, if they are able to become the dominant company in the industry, as Nintendo is with handhelds, they can make more and more money on their games. The amount it costs them to manufacture the hardware and develop the software decreases over time, and so their marginal profits can be turned into huge ones three years later. Look at the GameBoy product line and the original PlayStation. By the time the GBA came out, Nintendo had literally thousands of titles available for it which now cost them a tiny tiny fraction of the original manufacturing costs. They were able to churn tons of games based on what they knew from ten years of market experience to be successful formats (in other words, the continuation of the Mario franchise with games that are original enough to not just be rip-offs, while still sticking to the basic run-and-jump formula that made the first few such big hits), as well as ports of games for other consoles. When you really look at it, Nintendo has hardly made any forward progress in the field of handheld gaming technology; it took them 10 years to go from a black & white 8-bit system to a full color 16(or is it 32?)-bit variation. That's really quite ridiculous when you consider that Sega had their Game Gear -- a virtually flawless handheld console -- out only what, a few years after their comparable home console system. It's because they had a monopoly on the market, and so they were able to make a considerable profit on technology that was basic enough to cost them hardly anything. Sony did the exact same thing with the PlayStation: they were churning out games for it long after it had been "replaced" by the PlayStation 2, and while the latter console was very popular when it launched, I'd be willing to bet that Sony was making more actual profit on the sale of PlayStation 1 games than PS2 hardware or software for at least a year after the PS2's launch.
Anyway, if they made emulators, it would be alot easier for other companies to reverse-engineer their systems and cut in on their markets. As long as the game companies make consoles, the only factor that matters is how much money they're willing to throw at it to "win" the console wars. When the X-Box came out, it nearly flopped. The only reason it didn't was that Bill Gates was so intent on overtaking the video game market. This is the exact same reason Nintendo is selling their GameCubes for $99 now.