2. IR Shell- USBHostfs
First copy the required folders (IRSHELL and PSP) to your Memory Stick root (ms0:\)
Remember to leave the USB cable attached to the PSP.
Now go to your GAME menu and select IR Shell.
Once IR Shell loads, look for the usbhost0 icon (Toggle USBHost). Click it. You will get an Error, don't worry about it.
Windows will make the "New Hardware Connected" sound and find the "PSP Type B".
A pop-up will appear to search for the proper drivers.
When it asks to search for drivers online, select "No, Not at this time" and click "Next".
Select "Install from a list or specific location (Advanced)". Click "Next".
Select "Include this location in the search." and browse to "C:\Program Files\PSPHost\driver" (or where you installed PSPHost).
The driver will install. Click "Finish".
Now to activate the USB Connection.
Right-click on the PSPHost Icon in the System Tray. Select Enable USB.
Your computer is now ready tp accept connections from your PSP.
Back on your PSP, click X to get rid of the Error. Click the usbhost0 icon again to have access to the files on your PC.
For more information on IR Shell v2.0, see the included User Guide.txt.
Source
You can also play it via WiFi, but the process seems complicated, and I never tried.