An official ISO loader has been found in the latest Sony PSP firmware updates (both 3.50
). The file, np9660.prx, has been presumed to run downloaded PSP games (the encrypted ISO image) off of a memory stick.
The presence of the ISO loader may not be significant on its own, but the speculation is that it may be the first steps for a games-on-demand service where full PSP titles (not just PlayStation One emulations) will be made available for download and play, sans UMD. It's an interesting possibility but at this point just rumors and speculation.
[Via PSP Fanboy]