PBP in the folder PSP/GAME/UPDATE - it is important the the folder names are ALL CAPITAL LETTERS.
Then, with your PSP charged (and preferably still plugged in to avoid battery glitches), go to the games section, select Memory Stick and then select your update.
Then navigate to the PSP's game menu on the XMB menu and select update.
Make sure the PSP has about 50% battery and is connected to a power source, just to be on the safe side.
This video is a little hard to see but he will talk you through the main points.
Requirements: PSP Phat or PSP Slim with 3.52 M33 or higher.
System software updates have added various features including a web browser, Adobe Flash Player 6 support, additional codecs for images, audio, and video, Play Station 3 connectivity, as well as patches against several security exploits, vulnerabilities, and execution of homebrew programs.
The battery must be at least 50% charged or else the system will prevent the update from installing.
We recommend you to check this page on a regular basis for software updates as it is best for your system to use the latest version of the system software, allowing you to benefit from all the features of your PSP. It's recommended for all PSP owners to upgrade to the latest firmware. Prepare to save the update data on Memory Stick Duo™ media, using one of the following methods: Connect the PSP® system to the PC using the USB cable Connect a commercially available Memory Stick USB reader/writer to the PC Use the Memory Stick slot on the PC Create a folder for the update data on Memory Stick Duo™ media. Within the "GAME" folder, create a folder named "UPDATE". You must save the downloaded data as noted in these instructions.
Homebrew enthusiasts will warn you off upgrading your PSP firmware (the built-in operating software that manages activity on your PSP) but it's getting more and more irresistible as Sony adds more features.
A big update recently included the ability to play AAC files, download video through RSS and, for those lucky few with Play Station 3s, the ability to download and play PSone games. If so, follow our guide to make the upgrade as painless as possible.
Back up your save files (so that if they get corrupted, you still have backups) How to install 5.50 GEN-A CFW on your PSP: Extract the 5.50 GEN-A files to your computer. (Yes, just drag the whole folder there) Run 5.50 UPDATE from under Game on your PSP's XMB After THIS process is complete, press X.
After confirming that the Firmware 6.61 has barely changed (compared to firmware 6.60), developer Qwikrazor has updated the PRO CFW (partly) and the 6.60 Downgrader (once again, partly) to support the firmware 6.61.