CNET's
Guide to PSP Video 9 
Unfortunately, playing videos on your PSP is not as simple as just copying files to your PSP. This is due to the fact that the PSP only knows how to handle one video format (as opposed to the many PC formats like avi, mpeg, etc) and that it only plays video files that are named a certain way.
But fear not, with PSP Video 9, you can convert your PC video files in to PSP video files and copy them over to your PSP, all with a few simple mouse clicks
PSP Video 9 is a free PSP video conversion and management application. It can
convert regular PC video files (avi, mpeg, etc) into PSP video files, as well
as manage/copy these PSP video
files between your PC and PSP.
PSP Video
9.0 supports a wide variety of source formats, including MPEG, AVI, MOV, and
WMV (if your source video is coming from the Internet or a digital video recorder)
as well as VOB (if your source video has been ripped from a DVD). We leave it
up to you to ensure that your source videos are attained through legal means.
Unfortunately, PSP Video 9.0 is currently a Windows-only program; if you're a Mac user, you'll want to check out PSPWare ($15) or iPSP ($20, and also available for Windows). Both programs offer conversion and syncing features similar to those of PSP Video 9.0. If you want to preview your converted videos before transferring them to your PSP, you'll also need the latest version of Apple's QuickTime player, available on Apple's Web site. Once you have all the necessary software installed, connect your PSP to your computer via USB, wait until your computer detects the new device, then start up PSP Video 9.0, which should detect your handheld automatically. You're ready to convert your first video!
In most cases, formatting a video for use on your PSP can be as simple as loading it up and running it through PSP Video 9.0's default conversion profile. But if you go with the defaults, you'll be stuck with a 320x240 video that may not be optimal for the PSP's wide 480x272 screen; besides, if we wanted to go for the default, this wouldn't be much of an Insider Secret.
The first step
in achieving optimal PSP video quality is determining the aspect ratio of your
source video. In all likelihood, this will be one of the following (aspect ratios
are listed in increasing order of how many steps it will take to achieve optimal
quality):
Standard
4:3 format (screenshot)
Wide-screen 16:9 format (screenshot)
Letterboxed 4:3 format (screenshot)
Due to limitations in the PSP's firmware, the maximum standard resolution recognized by the PSP is 320x240, and the maximum wide-screen resolution is 368x208. PSP Video 9.0 comes equipped with several preset conversion profiles at both of these resolutions, and so if your video falls under No. 1 or 2 above, all you'll need to do before converting is choose your desired and audio quality setting, by going to Setup > Profiles and choosing an Existing Quality Profile.
Higher bit rates such as 1,500Kbps will look better on the screen but will also take up more space; lower bit rates won't look as good but will allow you to fit more movies on your Memory Stick. Variable bit rates, denoted in the profiles dialog box as "QBnumber," can be more efficient than static bit rates because they analyze your source video to determine when higher bit rates are necessary and when a lower one will do. When setting a variable bit rate, the overall quality and size of your output will be inversely proportional to your QB number; for instance, 4 yields a large but high-quality file, while 10 results in a lower-quality file that takes up less space. Quick tip: Check the properties of your source video to determine its bit rate, and don't go any higher when converting; this will save on file size without affecting overall quality, since there's no benefit to exceeding your source bit rate. When you've chosen your quality profile, hit Apply, navigate back to the Convert menu, and skip the next paragraph.
If you have a letterboxed source video, you have some cropping to do. In PSP Video 9.0, head to the Setup menu and navigate to the Profiles tab. Choose an existing 368x208 profile, since you'll want your output to be wide-screen, then click the New Profile button. Enter a new profile name and check the "Crop Input Video (by pixel)" box. To determine how many pixels to lop off the top and bottom of your source file, we recommend taking a screen capture from the video (using Alt + print screen) and measuring the length of the black bars on either side of the frame using Photoshop or a comparable image-editing program. Once that's done, hit the Apply button, head back to the Settings tab, and set your newly created profile to be the default. Now, you're finally ready to convert your first video.
This is the easy part: click the Convert button at the top of the program's interface, then click the Convert New Video button. If your desired source video isn't showing up, you may need to expand the Files Of Type field to include All Files. And that's it! While your movie's being processed, you can queue up other movies that you'd like to convert. When the process is finished, it's time to transfer your newly minted videos onto your PSP.
One of Sony's many brilliant moves in crippling the PSP's video functionality was to insist on an opaque and inflexible file system for movies on the Memory Stick; if a video file isn't named "M4V1000number.mp4" and located in the \MP_ROOT\100MNV01 directory, your PSP will pretend it doesn't exist. Luckily, PSP Video 9.0 allows you to customize the titles of your converted movies, so you can tell them apart without worrying about sifting through a sea of random letters and numbers.
To customize and copy your movies over to your PSP, make sure your device is connected, then click the Copy button on the top menu bar. In the left field, select the file that you'd like to rename, then on the bottom of the screen, click the File Info tab. Then, edit the Title field to your specifications and click the Apply button. Once that's done, simply drag the video from the left field into the right field, wait for the transfer to finish...and you're done. Unlink your PSP and start enjoying video!
Background
The PlayStation Portable (PSP) is Sony's newest handheld device. Not only can
you play video games on it, but you can also listen to music, view pictures
and most importantly, watch video on it.One of the most prominent features of
the PSP is its display. It is a 4.3 inch LCD screen, perfect for playing videos
in a widescreen format common to most DVDs.
The PSP has two storage devices: the Universal Media Disc (UMD) and Memory Stick Duo. (Note: Sony has made many different types of Memory Sticks. Only the ones with Duo in their name work with the PSP.)
The UMD is a Sony proprietary optical disc capable of storing 1.8 GB of data
in a small package. This is 3 times the capacity of a standard CD. In addition
to video, these UMDs can also store PSP games and Audio. These discs are read
only, like a CD, and are only produced by Sony at this time. There is no way
for anyone, other than Sony, to make their own UMDs at the moment.The
UMD video discs include DVD-like features like alternate audio and video tracks,
scene selection chapters, subtitles, slow motion and fast forward. Sony has
already announced a number of UMD Videos, a list of which can be found here.
The Memory Stick Duo (MS)
is a Sony proprietary flash stick capable of story up to 2GB of data in
an even smaller package. The largest MS holds a little under half the capacity
of a DVD. These sticks come in all sorts of sizes including: 32MB,
64MB, 128MB, 256MB, 512MB, 1GB and 2GB. These flash cards are writable and
anyone can read and write to these cards either using their PSP and a USB cable
or a Memory Stick reader. In addition to video, these memory sticks can also
store saved game data, photos and audio.