Right, I'll say it now, DO NOT UPGRADE ANY FURTHER!!! At least not until you've heard about what you can do and decided if you want to or not!
Now for the explanation of this outburst.
An "update" or "upgrade" is Sonys method of improving the PSPs core software and removing any security holes. By getting a 1.5 PSP you had the ability to run homebrew software, these are programs created by the public (not Sony), such software includes emulators to play games from other systems (i.e. Super Nintendo or MegaDrive) and conversions of PC software (i.e. Doom, Quake or ScummVM).
By only upgrading to 2.00, you can still run some of that software using Fanjitas Eboot Loader or you can even downgrade back to 1.50 for full access to the available software.
The problem comes when, like GTA, new games demand an upgrade. Thats when you need to decide whether you want to play the newest commercial games, or the homebrew software. Although with 2.00 you can run 99% of the commercial games and most of the homebrew (all the good ones anyway)!
If running homebrew code interests you then don't upgrade any further and you can find tutorials on using it around these forums.
Feel free to ask questions if any this is still confusing!
Cheers,
Fox
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