I had one (bought and then sold it on eBay). I had recently bought an ipod and made myself only keep one. And since I was exercising a lot then, I went with the ipod.
It was really great though. Tons of features (games, movies, internet, photos, music...).
As far as the games quality, imagine playing a portable PS2 with an awkward controller. Maybe that's selling the PSP short but it's close. I would suggest trying to borrow one from a friend or get to a Best Buy and try it out.
Check out
GameFAQs for more information on the PSP unit and it's games. It has a lot of info on how to download movies (which is a must!).