That title is correct: the official word from Sony regarding UMD usage on the Vita is that no, you will not be able to migrate your PSP games to the new handheld. That is to say, the service will not be available in North America, possibly due to its lackluster library of compatibility.
The service, called the UMD Passport Service, allows users (in Japan) to transfer their PSP games into the Vita, register the game to their PlayStation Network accounts -- soon to be called SEN accounts -- pay a fee (ranging from $6 to $31) and download the game onto the Vita. Titles from big name companies like Capcom or Square Enix are not available and aren't even officially confirmed to be made available, currently.
Preferably, the game will be stored on one of the rather expensive memory cards. Sony has addressed the high cost of the memory cards, but that is still a dissuasive factor against the Sony handheld. Not to mention, fans won't be able to even take advantage of their new handheld to play their old games - a feature that has been around for over ten years now.
Sony's decision to not bring the UMD migration service to North America is very saddening. No doubt there are numerous fans who are staring at their UMD collection and yearning for the day they will be able to play those games with the aid of a second analog stick. Regardless of this potentially hurtful decision of the company, Sony is still very confident that the device will sell well in North America when it releases on February 22. Judging by early reports of sales in Japan, the Vita hasn't exactly been dazzling the masses.
Luckily, the Vita only costs Sony around $160 to manufacture, not exactly tons of money and that fact is most likely propelling a much less stressful attitude at sales numbers currently. Japan's only one corner of the market, albeit a very large one, especially when it comes to handheld gaming. It shall be very interesting to see what kind of numbers the North American sales will bring Sony, and how they compare to day 1 launches of Nintendo 3DS.
PlayStation Vita releases on February 22, 2012.
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