Sounds like your friend is doing the old swap disc method to use imported games. That isn't illegal but if the discs happen to be copies of the original discs, those would be.
As for your system, I'm afraid it may be on its last legs. The laser is having trouble reading the discs, most likely due to age. At tis point you may want to consider picking up a cheap PS2 unit to keep playing and also expand your game selection.