Hey Cola, downgrading means you can play "backed-up" psp games, as well as things like N64, PS1, SNES games etc. There are also funky apps you can put on it.
Check this site out
http://geoleo.dk/psp/. For you to downgrade, you need to have the LUMINES 1 EUR/USA/Platinum game.
I downgraded to version 1.5, then installed some custom firmware that has all the features of the latest offical sony firmware, but with lots of extra capabilities.