I think the PS3 has hurt the PSP a bit. Sony had to shift it's focus to get PS3 going otherwise the core business would be in jeopardy. Plus the ill fated PSP Go didn't help and the lack of games has hurt the franchise and virtually no marketing. Rumours of PSP2 didn't help either as people are holding out for the latest/greatest.
I hope Sony will get to release a new next gen PSP soon to show that they're committed to this platform.