ModChips | Software Hacks | Disc Swapping
Modchips are additional hardware chips which get wired onto the PS2's mainboard and patching certain parts of the PS2's hardware (some modchips even resorted to fully replacing the PS2 BIOS to be able to work). But once installed and depending on the modchip itself you can easily play self-burned copies and imports, be it PS2 or PS1 games.
Today its pretty hard to still get your hands on them because Sony started to admonish the sellers, at least in europe.
QA about modchips at http://www.ps2-chips.com/
Frequently Asked Questions
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Whats better? Modchip or Softmod?
In the end it doesn't matter but you get alot more functions when softmodding. (And it's probably cheaper too) Otherwise if you like playing or having physically burned discs without alot of tinkering a modchip may be better.