Firmware consists of various bug fixes, updates, new features and tweaks for the PSP. The latest out now is I think 3.93...not so sure. You can either go to Network Update in the PSP XMB or download it from the Playstation website. Google it :D
Network Update requires you to have a WiFi connection though. Simplest way, go the playstation site, click on PSP and go to Support, then click on Firmware and it should link you to the latest firmware available. Then simply transfer the update folder to K:/PSP/GAME, where K is letter of the drive of your PSP. Network Update is the best in my opinion though. Once you transfered it to the GAME folder, navigate to Game on the PSP XMB and you should see the update there and simply run it.
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