I have never, ever, used the game3xx folder on my psp, what exactly is it for?? I've only ever used the GAME, and GAME150, but 99% of the time just GAME.
It is to play things that require 3.XX. If your game folder is set to 1.50, you can't play 3.XX homebrew in the GAME folder, so you set it in the GAME3XX folder.