alright so im thinking of buying a psp and i want to mod it, or hack it or w.e you cal it
and i just wanted to know what i can do with it when its modded

There is no modding required, aslong as its running Firmware version 1.5 or below you can run all homebrew. anything above 1.5 and your very (very) limited.

Once modded you can load games (homebrew, and your ISO backups) from the MEM stick, you can also load emulators and play some retro games.

so theoreticaly, i wouldnt have to pay for games? i could just download them to my mem stick?

See how i said "your ISO backups" and not "downloaded pirated ISO's", you can't take this conversation in that direction.