Toshiba has developed something called DTR which could increase HDD capacity ever further.
Apple may have added a few extra colors and some extra storage to their iPod lineup yesterday (read bout it here), but the a max of 160GB of capacity for the iPod Classic still seems kinda small, especially when half terabyte hard drive can be had for about $100 bucks and some change.
Toshiba, the exact same folks who developed the first 1.8" iPod hard drives have been playing around with perpendicular recording in the hopes of expanding drive capacities. The new method still uses the perpendicular approach (standing magnetic bits on end to increase aerial density of the hard drive platters), but uses something they've called Discrete Track Recording (DTR).
The method is simple; separating the parallel magnetic data-storing domains that are written upon the drive platter medium. To put that into plain English; leaving a small gap between the parallel tracks to prevent magnetic migration between stored bits.

The old technology on the left looks like a hammer and chisel when compared to the new.
It is quite likely that DTR will require higher density read/write drive heads, and an improvement of the magnetic medium that is electro-plated/electro-magnetically layered onto the platter (it's actually a big industry secret how they do it).

The DTR rainbow effect is totally worth putting a window in your hard drive.
So does this mean extra room for that already obscene collection of MP3's and movies pulled from the World Wide Web? According to Toshiba, DTR could yield a 50% increase in the available storage space for 1.8" portable media drives (like the iPod) and increased capacities for laptop hard drives. The extra storage space will also allow for added information that is never seen by the user, but still integral to drive function. That could encompass additional data to facilitate enhanced performance of the drive appature arm which moves the read/write head. There could also be larger sectors available for the FAT (File Allocation Table). Perhaps Toshiba could even integrate ECC (Error Checking and Correction) tools into the drives firmware. Such a tool could continuously monitor for dead or dying sectors and remap the drive structure to prevent data loss. An integrated defragmentation tool could be useful too.
Toshiba has said that this new drive technology is best suited for small storage uses. The DTR 1.8" portable media drives should be in mass production by 2009, with laptop drives following near there after.
But the desktop, that's what I'm waiting for! The 500GB drives are undoubtedly the best deal right now. There's a growing collection of 750GB drives available, and even a couple 1TB drive on the market. But can you even begin to imagine 2TB drives? Try 8 in a RAID0 array for 16TB worth of whatever you want. Music, movies, games, and to beat someone to the punch, I'll be the first to mention the XXX side of the Internet.
