How to Fix a PSP Memory Stick
Upgrade your PSP's Firmware (its operating system) before doing anything else. Firmware 5.0 solves many software problems that are encountered with older memory sticks. You can upgrade it by simply connecting your PSP to any wireless connection through its WiFi. Once a connection is established, the PSP will update itself automatically.
Check to see that your memory stick's plastic tongs, the small sticks that separate each connection, are straight. If one is bent, your PSP will not recognize the stick.