MathieuLH explain, on devsgen.com that firmwares 3.50 and 3.51 have an ISO loader made by Sony.
Mathieulh says that since 3.50 Sony left us a nice prx called np9660.prx, this module is no more than an iso loader meant to load encrypted isos from memory stick ( take a look here : http://moonlight.lan.st/3.50/kd/np9660.html ).
Also Sony have started to use flash3 and game_plugin seems to look for binaries from there.
The real question to ask is: " Why an ISO loader in an official firmware ?"
In here is a good question and the assumptions on the subject are on the way. Most probable gives as explanation that Sony will propose to play with downloaded PSP games via its network PSN. Would the era of the GOD (Game on Demand) be on the way?
Awesome,uh? Let's see if this gives us more compatibilty.
The news of this ISO Loader from Sony doesnt mean we condone piracy and downloading of Sony PSP Isos, if the Loader is to be used as a way of loading your own games onto a mem stick then that is fair enough. Please remember that the downloading of ISOs kills off the very console your a fan of. Piracy is bad for all.