Various emulators do it different ways to different degrees, but generally it takes quite a bit of processing power. The Snes emulator for the PSP only works decent on some games when it comes to multiplayer, and that's after quite a bit of work has gone into it. The PSX multiplayer via IRShell was never reliable, for me anyway. If Retroarch does end up supporting multiplayer, I doubt it'd be for anything more advanced than the Snes or MD. I could see it working well for NES or SMS games, maybe GB/GBC.
I'm not trying to dash people's hopes, and I'm no expert, just want to prevent people from needlessly getting their hopes up. If somehow someone got PSX or N64 ad hoc multiplayer working reliably on the PSP, I'll be presently surprised, but I have serious doubts. The multiplayer does work on the PC, but your PC is far more powerful than your PSP.

