Ideally, it will be converted to 480x272 AVC. I think there will be a slight difference in quality. I've converted HD content to the PSP as well as DVD movies. The HD content looks brighter, and more crisp. Movies on DVD are usually compressed already to fit on the DVD. Then compressing it more for the PSP does have slightly noticeable affect. The loss of quality is minimized due to the downscaling of resolution but its still there.