Pressing the PlayStation button on the Go brings up two options: Pause Game and Quit Game. We made our LocoRoco jump into the air and pressed it, selected Pause Game, and within 10 seconds reached the XMB (after a progress bar appeared to indicate the saving of the game's current state).
After selecting Pause Game, an icon appears under the Game section of the XMB -- it looks a bit like an egg and is labeled "Resume Game." We selected it and, 10 seconds later, were right back where we'd been, LocoRoco still mid-air. We had similar results with Arctic Edge, only we decided to use some of the system's functions, including the web browser, while the game was on hold. Again, a 10 second load and we were back, this time with a prompt to "press X to resume" the race.
We asked Sony if this feature will eventually make its way to the standard PSP and were told by PlayStation Network's Eric Lempel that it's PSP Go-only. It's a really convenient feature from our testing and has a nice added benefit: The Go can be completely powered off and still retain the game state, unlike with the standard PSP's sleep function. We'll have a full review of the PSP Go soon.