As Wololo posted on his blog, The Z is using Frostegater's port of VHBL which uses a PSP exploit of an unknown game. Frostegater is known for finding a PSP kernel exploit in firmware 2.00 and getting VHBL running on it as well. As Wololo points out, it is unclear which direction that Frostegater will continue in--working towards a VHBL release or a CEF port--being that he has access to both exploits. It's a waiting game from here on.
In the meanwhile, take a look at VHBL running on firmware 2.01:
News Source: Wololo