I have never really been a fan of watching movies on a PSP, they are small and portable, but to me you would just use those portable DVD players instead. I don't own one, but have seen one played. Was not overly impressed when I saw it. I am all for alternate distribution models, but I never thought this one would take off.
Interesting article about them, here .
They are looking at making the PSP capable of connecting to your TV to play the movies, but again I ask, you (well nearly everyone does) have a DVD player already, what's the attraction.
Will it save the PSP UMD movies? Not sure.