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Sony - I got a PS3 and PSP!! - View Post

To seperate demos from PSN games:

Press Square until you are grouping "By Album." Alternatively, you can press triangle on any game/demo, select Group Content (square) -> By Album.

Everything should then be in the Unknown folder. Go to each PSN game and press triangle. Go to Information, and set the Album to "PSN" or whatever you want the PSN folder to be called.

You should now have 2 folders. PSN and Unknown. I just keep demos as Unknown because it's just a waste of time to go through all of those and mark them as demo when you will probably delete them shortly after playing them.

If you ever buy PS1 games, you can probably do the same thing and make a seperate folder (album) for them too.