The site PSP-Hacks is a good place to start. I have done 2 mods and it's not hard but depending on what firmware is on the PSP, you may need to purchase GTA Liberty City. Just make sure you read over the directions a few times before trying it.
I'll throw a guess out there and say modded to run programs off the memory stick instead of just the disc drive. Home brew, pirated games, all that stuff.