Hi,
I have both. The PSP is the 2000 version and the ipod is the previous version.
The PSP is HORRIBLE at surfing the web. When I am watching tv I like to check up on things online and the iPod is perfect for that.
The PSP has less games but they are more of the common games you are used to, final fantasy, god of war, etc.
Pick based on what is most important to you.
If internet, personal apps (like bank sites), and causal games are your thing go with ipod. If you just want hardcore gaming go with PSP.