Everyone says the PSP can play DVD's, but how? Do you have to copy a film to the computer or something?
Actually you are both right. The PSP plays UMDs, the proprietary media for the PSP on which the game are also written, but you can also rip your DVDs to your computer, convert them to the proper format with various available software, and use the USB 2.0 connection to transfer them to another form of proprietary media, the Memory Stick Duo. The memory stick packaged with the PSP is only 32 megs, though, and this isn't enough to store a movie. You might get away with some movies on a 512 megabyte stick, but only if you're willing to take a hit in quality. The best solution is to buy a gigabyte stick. This is an expensive option though with the lowest price occasional online sales pricing them at around 80-90 dollars. If your money is burning a hole in your pocket you could buy a 2 gigabyte stick but it is upwards of 170 dollars!
Personally I own a PSP, but have been unable to afford a Gigabyte sized stick. I do own a couple of UMD movies but only my favorites. When purchased new they can cost 24-27 dollars typically. Some are as low as 18 dollars and some are as high as 32. I purchased both of mine used for 14 and 13 dollars.
Watching movies on the PSP is great, but only for travel. Boy does it make the hours on a plane/car go by quick!