To read a game disc into an ISO is called "dumping" for historical reasons - it's old computer lingo for copying every single bit of a medium to a file, for archival storage or other use.
PPSSPP can play files directly from these formats without decompressing them first, which makes them much more practical than keeping your ISOs files in .ZIP or .RAR archives.
CSO is the oldest and most well-tested compressed ISO format for PSP, and it's compatible with various custom firmwares for the real PSP, so the files are playable from a memory stick on hardware. It has a good compression ratio, performs very well in PPSSPP, practically as fast or faster than ISO, depending on how slow the drive is you're reading from.
The best tool to compress tools to CSO is maxcso by [Unknown].
CHD is supported from PPSSPP 1.17, and stands for Compressed Hard Drive. It's MAME's format, originally made for archiving arcade game hard drives, but later repurposed for disc-based systems. It has a slightly better compression ratio than CSO, but to perform properly, PSP ISOs need to be compressed to CHD in the DVD mode (
The tool to create CHD files is called
chdman and is distributed with MAME. You want to use a recent version to compress PSP ISOs.
Here's the command line for compressing a PSP ISO to CHD with chdman, once you have acquired the tool:
chdman createdvd -i game.iso -o game.chd
Just replace "game" with the name of your iso file.
PPSSPP 1.17.1 also supports an additional mode, using zstd for compression, which might perform slightly better:
chdman createdvd -i game.iso -o game.chd -c zstd
IMPORTANT! DO NOT use the
createdvd is what you want to use.
If you want to turn your .chd back into an ISO file, here's the command:
chdman extractdvd -i game.chd -o game.iso
If you have digital downloads on your real PSP, they can be used directly on PPSSPP. Just copy the
EBOOT.PBP over. Note that this has not been tested as much as ISO loading so there may still be issues with some games.