It will be free with one game (Space Harrier II), but you'll be able to buy more games within the app for $5.99 and under. Sonic the Hedgehog, Shining Force, Golden Axe and Ecco the Dolphin will be among the first games available.
Sonic the Hedgehog and other Sega games have been available as independent downloads in the App Store for months. The idea here is to bring it all together into one app, making things easier to manage. The app will also give Sega the chance to tempt you into buying more games every time you load up Space Harrier II.
Game emulators allow you to use software intended for another device on your phone. They've been popular on personal computers for a very long time, but the questionable legality of the unofficial copies of the games has given Apple pause about allowing these things into the App Store in the past. This Genesis emulator (called Ultimate Genesis) was built by Sega itself, and it will play only games Sega makes available in its store. Sorry, but you won't be able to import those 1,000 Genesis ROMs you downloaded on your PC or Mac.
Unofficial emulators that can play those ROMs are still out there, but you'll have to jailbreak your phone to use them because they're not available through the App Store.