Yeah it can run the game from the actually disk in the drive but there might be some lag playing a game that way on it. Best bet is to use something like ImageBurn and make a .iso rip of your ps2 game and load the iso of the game to play, it gives 80% performance boost!.
And that emulator for PSX you are thinking might be Epsxe I believe it has the loading from real disk option (Which was a godsend for when I started emulation xD).