PPSSPP will attempt to establish connection to any IP or domain that is put in the ad-hoc server text box. So, much like a web browser, it entirely depends on where you tell it to connect.
That being said, as for any security concerns, I am unaware of any exploits and/or wrongdoings with PPSSPP code, so you should be safe. It only passes the data directly between the emulated games and the chat box feature.
If it's true, that's pretty sweet.
I've seen girls at locals too so it's not entirely impossible.
It's just uncommon, much like anything else. Especially so for Yu-Gi-Oh because it's simply not as popular as it used to be (especially when compared to Pokemon or Magic).