Sony offers via their Connect service free video downloads for the Sony PSP. Sony also explains with a tutorial how to download, transfer and play video on the PSP.
The Connect PSP site offers a setup.zip download that only is a video file with the correct folder structure to configure the correct folders on the memory stick. You do not need to download that. Just create the folders MP_ROOT/100MNV01 on the Memorystick. The video in the setup is only a Sony welcome message.
Sony PSP Connect hosts currently 20 videos for free download. Commercials, Movie Trailers, comic episodes are amongst the clips. Sony says each week new clips are made available. The clips have different length. For some at least a 128MB Memorystick Pro DUO is necessary. Better buy a 512MB Sony Memorystick PRO DUO right away. Check out the latest deals on that.
I downloaded the Stealth Movie Trailer (some kind of new Top Gun Movie). The videos come as zop files. In the zip file are a MP4 video file and a THM thumbnail file. Great to watch on the PSP. Make sure you switch to zoom mode to use the full screen.
More details on the Sony Connect PSP site.