At this time the only real working Sony PSP emulator for playing PSP UMD ISO files is the one made by Sony itself. Surprised? Don't be - it was made purely for game development purposes and is distributed together with the Software Development Package. The problem is - to download or use it you have to be one of the Sony licensed game developers and have a contract with them. So far nobody has broken the rules of contract and released the emulator to the public but who knows - miracles happen.
The emulator that we have seen in SONY press releases and used in press conferences runs on PC and can play games (psp roms) at full speed. Plus it has debugger that PSP devers couldn't live without.
http://www.psp-emulator.com/