Psyco is a specializing compiler. In a few words let us first see:

What you can do with it

In short: run your existing Python software much faster, with no change in
your source.
Think of Psyco as a kind of just-in-time (JIT) compiler, a little bit like
Java's, that emit machine code on the fly instead of interpreting your Python
program step by step. The result is that your unmodified Python programs run
faster.

Benefits
2x to 100x speed-ups, typically 4x, with an unmodified Python interpreter and
unmodified source code, just a dynamically loadable C extension module.

Drawbacks
Psyco currently uses quite a lot of memory. It only runs on Intel
386-compatible processors (under any OS) right now. There are some subtle
semantic differences (i.e. bugs) with the way Python works; they should not be
apparent in most programs.