Looks like your UMD drive went bye bye
Your best solution will be to take it to the store if its on warranty or to install a custom firmware and play backups (ISO/CSO)
When you have a custom firmware you can turn on the option for playing the backups without a UMD inserted.
I have installed custom firmware on 2 psps that had that problem, both of then are playing only backups, because the UMD has gone on vacations
Of course, if you dont have a UMD you cant make a backup, so you´ll have to make a trip to sites were you can download PSP games, dont let the dark side seduze you, good luck