PSS (PlayStation Stream) is a standard PlayStation2 video file. Many PS2 games ( FMV ) use this format.
PSS can contain MPEG2 or MPEG1 video and aiff, PCM, ADPCM, ATRAC3, AC3 or ADX audio.
The Guide.
Download PSS Demux 1.05
extract and run it

browse the PS2 game DVD, and look for PSS/MOVIE/STREAM folder
drag-and-drop the PSS.
PSS demux will create 2 files, M2V and WAV
convert to AVI [using VdubMod]
`run virtualdubmod, open the M2V file, go to stream then add the WAV file.
`right click the wav, click full processing, click "compression", now choose MP3 48KHz, 192kbps, stereo
`click OK
`click video then clik compression, select DivX or XviD.
`click file, save as.
now, the file will be in avi, to convert to MPEG, you can use any video conveter (Nero Vision, TMPEGEnc, etc)
NOTE:
some PS2 games use MPEG1, or MPEG2 video codec.
some PS2 games use PCM, ADPCM, ATRAC3, AC3 audio codec.