How To: Watch DivX Files

you can watch div-x files by simply installing a copy of the homebrew called PSPTube. Place your divx videos in the favor.

1. Download PSPTube 2008/02/28 and install it; if you haven’t already
2. Copy DivX video file(s) to PSP/GAME/PSPTube/favorites; ensure the video file extension ends with .divx
3. Run PSPTube and start watching.
   

source: PSP Hacks

Personal Notes: It doesn't seem to handle large resolutions or AC3 sounds well. Still, it's better than nothing at the moment.