CHD was originally a format for compressing hard drives from arcade games in MAME, but has become since the most popular format for storing ISOs for CD- and DVD-based video game consoles. PSP already has a different format, CSO, which can be used toilize loss-lessly compress ISOs, and as a bonus, unlike CHD, these actually work on the real hardware.
So you might ask, why support CHD? It does provide a slightly better compression ratio, but the main reason is that it’s simply asked a lot. Many people seem to familiarize with a set of tools, and since CHD works to...