PSPs work a lot like computers. Sony releases version updates every so often and they give you more possibilities like... well I'm not too sure actually. There are benifits to having both lower and higher versions/firmwares.
All Software versions/Firmware
1.0 (Japan Only)
1.5
1.51
1.52
2.0
2.01
2.5
2.6
2.7
2.71
2.8
3.0 (coming soon)
There are many advantages to having newer or older versions. You see, there is something called 'HACKING' which is the best thing in the world. The lower your firmware, the easier it is. "Homebrew" are programs made by people for the PSP. PSP has a HUGE homebrew scene so it's a matter of downloading files and copy/pasteing them. All Homebrew works on 1.0-1.5, though 1.5 has a very minor inconvienience to it, you don't even need to wory. 1.51-1.52 is worthless because they patched it. 2.0 allows trojans on your psp which crashes it allowing most homebrew. The popular game: Grand Theft Auto has a loophole in the save game system whcih allows most homebrew for versions 2.0-2.6. Homebrew does not work at all in anything higher than 2.6. Once you upgrade past 2.6, you just rendered your psp worthless pretty much. There are homemade downgraders for 2.0 (completely safe) and just recently 2.5/2.6, though there is a 90% success ratio, but now we know which PSPs are the 10% and it's easy to find out. So what is homebrew you ask?
People all over the world have been making programs for psps and have been sharing them. Including:
-Classic Game emulators (Genesis, S/NES, arcade, etc)
-Radio
-Universal Remote
-Downgraders
-UMD emulators (allows you to run PSP games off your memory stick, this opponed the window for illegal downloading of games though)
-Media Players
-DEVICE HOOK (The single best program ever invented, allows 1.5 PSPs to emulate OTHER VERSIONS! So you can have the best of both worlds.)
The higher versions have internet, 'location free player' (useless), flash player, and 95% of games require you to have 2.0. This is where DEVHOOK comes in handy. 1.5 is the best firmware to have IMO.