Sony may claim VCD support. But this may or may not be true depending on your PS2 revision and your geographical location. For instance the US version does not have (tested) VCD support for CDR/RWs.
VCDs look similar to VHS except the data does not degrade with repeated play and you can easily cue to any location in the video; it has all the features an audio CDs would offer over audio tape, but not the additional quality when it comes to video. SVCDs look better than Super VHS (SVHS), but you can't fit as much video on a CD. SVCD also has lower compatibility with standalone players; The SD-1600 does not support SVCD.
How to make VCDs: http://www.cdrinfo.com/forum/topic.asp?TOPIC_ID=1915