In the main menu, select CONTINUE.
[part 1] Enter "SPECIAL" (Japan) or "SPCCMD!" (*) (Europe/USA) and select OK.
Nothing happens on the screen, but you will hear a sound that is different from the usual "bad password" sound. (*)
Start the game.
Press Start to pause the game.
[part 2] Press these buttons: B Y up down left right L R. (Look up the mapping in your emulator.)
You will hear the same sound as at the password screen. (*)
Make sure the game is not paused.
Press Start+Select to open the cheat menu.
(If you didn't enable cheats, then the "sound select" menu opens instead.)
The menu contains:
LEVEL SELECT -> go to a level (1-20)
SOUND SELECT -> choose music
BOOST METER -> get more HP (max. 15)
Press the X key to kill the current guard.
You can also set the function of a button to "KILL" in the OPTIONS menu. (*)
Note: The X key will lose its specialness if you change its function. (*)
Items marked with (*) are not mentioned on most other websites.
Though, Kaslghnoon mentioned something about the cheat password of the Europe/USA version:
From viewtopic.php?p=14320#p14320 :
Kaslghnoon wrote:I became open to the possibility that it was a secret to be discovered only by people like us, similar to the cheat password in the Konami version of the SNES PoP1...
And the "different" sound is mentioned here: http://www.cheatingdome.com/snes/princeofpersia-cheats.htm