And thus ends the life of my favorite handheld, goodbye sweet prince

It was only a matter of time...

I assume you can still transfer via PS3 as well?

I dont get it. PSP games will not be available to download on PSP, but still will be available on Vita?

Its expected. Good buy psp online services. PSP was the best handheld in the 7th gen.

The PS Vita is not affected by this change, fortunately, as it had no games to begin with.

The online services aren't being shut down, just the ability to access the store.  Very few games can get online anyways.  Most of them are adhoc only.  Phantasy Star Portable 2, the Star Wars games, the second Untold Legends on the PSP, Mega Man Powered Up, and Field Commander,  are the only ones I can think of off the topic of my head that had online connectivity anyways.  Everything else or almost everything else was adhoc only. 

Hope this doesn't affect the PSP version of Trails in the Sky SC. Weren't they planning on a digital release only?