Eurogamer (and anybody else who follows PSPUpdates for that matter) can confirm that the reported hack for version 2.0 PlayStation Portables definitely works – we've seen it in action.
The catalyst for running homebrew applications is buffer overflow exploit involving a PNG image file. Once the image has been planted in the PSP's photo directory and set as wallpaper, any software masquerading as an image file in the photo directory can be run from the photo viewer menu.
The best example we've seen of this so far is a two-player version of Pong, with the left paddle controlled by the up and down directional buttons and the right by the triangle and X buttons. Other examples include a "Hello World!" program.
Right now there's reportedly an upper file size limit of 64KB, but, with the basic tools to run homebrew software on PSP 2.00 now available, it's only a matter of time before someone smashes through that and we start to see an avalanche of new software.
Good news or bad news? We'd like to know what you think.