Being born in Brazil, the first time I ever saw a non-modded PS1 was when I briefly lived in the US in 2007.
In fact, the PS1 was never officially released in the country and the PS2 had its official launch there only in November 2009. Thus, since it was almost impossible for someone to get their hands on any official games there (at least for less than US$150,00 or so) the consoles would be sold in stores already modded to play bootleg games.
Nowadays, things are a little bit different, but I still believe that modded consoles are a valid alternative in order to experience games that, due to its current price, limited distribution or region lockout would be, otherwise, impossible to play.
As an example, I'm a huge fan of the two original Medal of Honor games on the PS1, however, living in Japan, the only way to play these is by using a modded console as they were never released around here.
As for homebrew games, I think that they can be a very interesting way to give new life to a console that has been left behind.