Versions?
Firmware versions, yes and you must decide if your gonna play only legal software on UMDs or if you want to play downloaded games in ISO and CSO and sometimes DAX format
Stock firmware: currently 3.80 can only play legal software ex. UMDs from same region and downloaded Demos
Custom firmware: currently 3.71 m33-4 can play all legal software from all regions, ISO, CSO, and homebrew software that have a myriad of different applications.
Advantages of stock firmware: does not violate sony warranties, LEGAL
Disadvantages: u cant play ISOs and CSOs, no homebrew
Advantages of custom firmware: You can play full version downloaded games ie free games, you use the memstick in accessing data for games which increases the life of your lens and since there is no motor running gives you more battery life, faster loading times, HOMEBREW APPLICATIONS if you dont know what this is google it and see the possibilities of the psp other than gaming.