A PSP Update is an install of the latest official Sony PSP firmware for your system. At the time of this writing the latest official firmware is 4.05. Updates to PSP firmware released by Sony fix certain bugs or issues with the PSP testing or users have shown. Updates may also be released to allow more music/video file types to run on the PSP. You must have the latest official firmware to download from the Playstation store to your PSP.
A PSP Downgrade is an install of custom firmware written by PSP users (not Sony). Dark Alex and his team have released custom firmware versions that parallel the Sony updates. Custom firmware allows you to run homebrew (user developed programs and functions) on your PSP. Custom firmware also allows you to run games and movies from the memory stick, no UMD required.
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