Magic Memory Versus Regular Memory
The PlayStation Portable can use a flash memory stick up to 32 gigabytes to store saved games and programs on your PSP. A Magic Memory Stick is a regular flash memory stick that has been altered by custom programming to allow you to downgrade your current PSP to a version of the system software that will allow you to install the PSP jailbreak.
Legality of Jailbreaking
The Digital Millennium Copyright Act of 1998 supports the rights of a consumer to make alterations to devices that they purchase for their own personal use. This includes unlocking an iPhone to change mobile carriers, cracking video game digital rights management and jailbreaking a game console to load custom firmware on it. However, by jailbreaking you typically invalidate the warranty of the device.
Legality of Playing Backed Up Games
The "Fair Use Act" and "Audio Home Recording Act of 1992" give consumers the right to make one backup copy of DVD's, audio recordings, video games and other such media in the event that the original copy gets damaged or destroyed. It is however, illegal to download or distribute this media, even if you own an original copy.
Other Reasons to Downgrade
With each revision of a system update to your PSP, changes in the operating system are made that may not be to your liking. Downgrading to a previous version of the PSP system software will let you revert to the prior operating system, though you may lose some functionality, such as the ability to connect to the PlayStation Network or play newly released games.