PSP plays MP4 (H.264/AVC Main/High Profile), AVC, MPEG-4 in MP4 / AVI containers. Resolution max 480x272 (30fps) or 720x480 (TV out).
VIDEO folder on Memory Stick / PSP Go internal.MS_ROOT/VIDEO/filename.mp4 (or MP_ROOT/100MNV01/MAQxxxxx.MP4 for older firmware). Modern CFW (6.61) reads VIDEO/ flat.
Avoid "free movie download" sites — malware + piracy.