Hey Everyone

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Last Friday the wife and I bought our neighbor old PS2 for $25.00 and I have already spent $217 at EBGames on Saturday, Well $20 for a Memory Stick and $25 for a New Game Pad the rest was Games and Taxes.
I was told by the Guy there at EBGames that with the older style PS2 or the Big Version not the Slim Version that there was something I could download and Burn to either a CD or DVD and I would then insert that CD or DVD before trying to play a backed up version of a Game then the Game could be played with no problems.
This is my 1st ever PlayStation so I'm very new to this.
1. Could someone please explain to me what I need to download and from where to play these games?
2. What is a ModChip Exactly and Do I need one?
3. Is it something that gets plugged into the console like a Video Card or Sound Card gets installed into a computer?
4. Whats the Best Route to Go when trying to accomplish the above?
5. Whats the Cheapest Route to Go when trying to accomplish the above?
6. How do I tell What version of PlayStation I have, If that is Needed to be known to do the above?
Thanks to everyone in advanced.
Going Crazy!