How Stuff Works strikes again with an expose on how the PSP works.
Its a nice little article.

“Sony practically invented the world of portable electronics when it released the Sony Walkman audio cassette player in 1979. When it came time to design a portable gaming system, Sony wasn’t content to replicate what had come before: Typical handheld game systems are a few generations behind the cutting edge of home console gaming — the Nintendo DS is about as powerful as a Nintendo 64, which came out in 1996. It is estimated that the PSP will have almost as much computing power as the full-size PlayStation 2.”