No it doesn't. The PSP is essentially a portable PS2. In fact the CPU and GPU in the PSP run slightly faster than those in the PS2. The PSP CPU runs at 333mhz the PS2 and 294mhz, the GPU of the PSP runs at 166mhz and the PS2 147mhz. When you combine that with the fact that the PSP runs games at 480x272 and the PS2 had to run them in 640x480 it actually tilts the edge in the PSP's favor. The PSP has a faster chipset than the PS2 and it runs games in a lower native resolution.

The reason PSP games having been looking so much better as of late is because Sony had restricted developers from running the PSP at full speed for the purposes of battery life. The initial limit was 222mhz for the cpu and 111mhz for the GPU. They later upped that to 266mhz CPU and 133mhz GPU. God of War: Chains of Olympus on PSP was the first game that was allowed to use the PSP hardware at the full 333mhz CPU/166mhz GPU clock rate.

This pretty much confirms a new PSP is comming. Those of graphics are on par with the gamecube

The psp is slightly more powerful than the PS2