COOL PS1 Copy Protection info:
On original discs, the track for sector 4 is intentionally not-spiral. This causes the error correction to bounce back and forth repeatedly as it tries to follow the track. The actual data on sector 4 is a dummy.

but the error correction actually encodes a low-bandwidth serial stream at 250 bits per second. When decoded it reads "SCEA"/"SCEE"/"SCEA", depending on which region the game is for.

since CD burners are always trying to keep the write head as steady as possible, it's completely impossible to encode a value into the error correction like this. It's done by intentionally writing the track in a wobbly manner.

so the first mod-chips worked around this by hacking where the error correction is fed back to the CPU and making it just say "SCEI SCEE SCEA" over and over, silencing the real error correction.

this worked because the region/copy-check was intentionally permissive of incorrect values, cause this wobbly-read thing is inherently fragile. So the PS1 can happily sit there and read for a while until it gets a sane value back.

so it wouldn't care that the mod chip sent the wrong value, as it's just waiting for the real value. 
however, games released after 1998 won't work with these early modchips. and the reason why is amusing

normally the playstation just checks sector 4 for this wobble, checks that it's there, and then boots the CD, right?
but after 1998 all games started including some Sony code that tries detecting the wobble on other sectors.

cause on a real disc, only sector 4 is wobbly, all other sectors should have barely any error correction feedback, and certainly NOT a value serial datastream.
but with a modchip, the CPU sees all sectors as having the "SCEI SCEE SCEA" copy protection on them.

so all games after 1998 now had to contain this code that could detect modchips and refuse to boot.

later "stealth" modchips used different methods to avoid this check. one method is just to only send data for the first few seconds at boot, then shut up. so the original boot sees the bitstream, but the later double-checks do not.