Summary: It wasn't clear from the description, but the unit I received *did* come with an M2 -> Memory Stick Pro Duo adapter in the box (it's not visible, but it's inside behind the paperwork inside the packaging). This makes the M2 memory card compatible with older PlayStation Portables (PSP-1000, PSP-2000, PSP-3000), and I've verified that it works in my PSP-2000. As for the capacity, like other storage devices, the 16GB is 16 billion bytes, not a true 16 GB.
Summary: I still can't believe 16gb of information fits in this little thing, but it works just as great as any other larger storage devices. Works great in the PSP and at that price, might as well get a few more for your cameras! Highly recommended!