ad hoc means "For this purpose".
For wireless gaming, it means that there isn't a router distributing this information, and that it gets sent back and forth between devices.
This for PSP translates to "Local Wireless play" since the PSP and any PSPs in the vicinity are talking to one another without a router serving as the medium of communication.
This is opposite of "Infrastructure", which is online play using a server as the method of communication between devices and the server would manage the connections, etc.