1. When did you buy the psp??
1a. Ok, in order to be able to install custom firmware(a firmware that is custom ) you need to have a pandoras battery,and a magic memory stick(a special memory stick you can make in order to install custom fw)
2. There is no right firmware, you can have any kind of firmware on your psp. But custom firmware is the best
3.The purposes to do all the mods is to make your psp look cooler than it is, to make it more useful(like being able to install homebrew, which is apps made for the psp not created by sony), and to make the psp alot funner and more exiting to use.(i LOVE mine )
4.Im not sure what "Change means" but im assuming your question is, why change the memory stick into a Magic Memory Stick. You change the memory stick into a magic memory stick so you can use the pandora battery to install custom firmware.
More Info on the pandora battery and magic memory stick
another guide about pandora batteries
Hope this helps