Why do I (or should I) do my Honours or 4th year in psychology?

Ok now for the 4th year in a degree in psychology. This is with the assumption that your bachelors course do not come with the Honours degree. If it does, good for you, you can continue your bachelors straight into the Honours year.

so what is the Honours (or 4th year)? Is it still a bachelors?
Yes, it is still a bachelors, however an extended year. Usually the honours year is an extended year where you learnt extra stuff in most courses. In psychology, the honours year is usually focused on the research part, where you will learn a little more on research and other psychological areas depending on the institution. YES research; You will be taught how to do and what to do for a thesis and you will have to prepare to do a thesis in the honours year.

Question: I am enrolled in a postgraduate diploma (PGD) for psychology. Is that still a 4th year program? What is the difference from a PGD and honours?
Yes the PGD is a 4th year program. I am commenting this for Australian courses (I am not sure about if there are PGD from other countries and their information). The Australian universities usually offer them to in order to have students to go through the 4th year, rather than just the Honours batch. Each batch of honours will have about 15-20 (or more or less, depending on the universities), and hence the PGD batch will have about the similar number of people.

It really depends on the universities on whether there will be a difference for the PGD and honours studies. I would believe the coursework would be very similar across both of the programs. For some universities, the main difference is that the Honours students do their theses alone and the PGD students do a group work for the theses. For some others, it is totally the same for both the honours and PGD students.

It is really up to you which one you wish to do, but I think it depends on your grades from the first 3 yrs as well. You may want to check for more information from the institution you are applying with.

Question: Now for the why? why do i need to do this 4th year studies?
Answer: If you wish to enroll into an accredited postgraduate course, you will need your 4th year results to get in. To get into the postgraduate courses, the usual minimum is a second lower class honours.
If you think that psychology is not for you, probably you should not enroll into the 4th year. But if psychology is what you want, I would say the 4th year is a good step for you to explore further and improve your skills in research.