I have put on-line some slides from the Python UK conference at ACCU 2004, explaining how Psyco works. It is actually a Pygame application... As far as I can tell, it is the first time someone in the room actually understood something at the end :-)
I hope it should help to make Psyco a bit less mysterious, and also explain why it is difficult to have a general idea about what kind of speed-up you can expect for specific kinds of code: it is, after all, a pretty low-level "local" process that Psyco does, and it sometimes pays off and sometimes not. It also explains why this process is very much like the usual interpretation that CPython does. If you think about it you might see how useful it would be for Psyco to build on top of an interpreter in a better language than C (i.e. one that can be analysed, not just blindly run).