PS4 games on the PS5 are going to call into three levels:
1. Compatible
2. Enhanced
3. Remade/New Version
So, the aim is for the top 1000 PS4 games (based on time played) to be 100% compatible with the PS5. That means you'll either be able to put your physical disc in, download the digital version from the store or purchase/download from the store.
When they say "compatible" they mean able to play the same on the PS5 as they do on the PS4/Pro. So if the game never had a Pro patch, it'll play as well as it does on a PS4. If there was a Pro patch, it'll play as well as it did on a Ps4 Pro.
The only difference being that if the game is installed onto the internal SSD, it will act as if you're using a PS4/Pro with an SSD installed.
By default, these compatible games will not be able to make use of the upgraded PS5 hardware - they are programmed with the PS4/Pro in mind and will be restricted - the PS5 effectively running in compatibility mode.
Those games that are enhanced will be able to make use of the additional PS5 Hardware - not necessarily all of it, all depends on how the game is enhanced. There wa a demo from some time ago of Spider-Man playing on a PS5 and making full use of the super fast SSD in the PS5. That will happen so long as the patch that enhances the game for PS5 is released and it wasn't just a tech demo for the new SSD.
It's obviously up to the individual software company to decide if they want to enhance their older games - Cyberpunk for example is confirmed to have PS5 enhancements at launch.
Then we finally have the remade/new version category. So Cyberpunk releases on PS4 on 20th November. At the PS5 launch there will be an enhanced version and then a year later there will be a PS5 version, which we are told will be a free upgrade.
AC Valhalla has a PS4 launch, there has been no confirmation on enhancements for the PS5, however confirmation that a Ps5 version will launch and users will get a free upgrade.