Theres a good indepth article over on ExtremeTech about
Hacking Your PSP Audio.

The article covers everything from encoding your music, the best audio formats to use, and the way different compression techniques work.

The article also references several pieces of software, some PSP specific, some more general, that can help you get your music organised and onto your PSP.

“Using the free program PSPShuffle, you can shuffle music, photos, and video onto your PSP using a very easy-to-use interface. First, tell the PSP Shuffle where to look in your media files. Then, using simple sliders, you can set what percentage of space on your PSP you want to be taken up by music, video, and images”

the article even talks about converting your documents to audio so you can listen to them with your PSP.

“Using affordable, easy-to-use programs, you can convert any text document to an MP3 file. Cut and paste your news into text files and convert them to MP3s—listen to your news instead of reading it.”

If you are interested in the general workings of the PSP Audio system, or are looking for some hints and tips aon how to get the most out of the PSP’s audio abilities, this article is a good place to start.