Haven't seen the commercial but I read up on it. Seems cool, but I think 128 MB for video is extremely small. Unless the screen is really small and low-res, there is no way you can fit an hour of video without compressing it like crazy. Looks like you can buy more memory though.
I haven't seen the commercial, but I just looked it up on Google and found the following site: http://vugo.com/vugo.php
It can only hold 128MB, and it says 1 hour, but it's probably compressed and with really bad graphics. It's $99, which is a really bad price, considering the price of the PSP.