My first computer, purchased in 1979, had 8K of RAM and 8K of ROM, BASIC baked in, and no persistent storage. My first hard drive was 60 MB and cost $600 in 1989. Now you can purchase one terabyte (TB) of storage in a single 3.5-inch Hitachi hard drive mechanism for about $400.
It's easy to purchase 1 TB of storage in a single package. LaCie, for instance, has offered a 1 TB Big Disk for some time, using two 500 GB drives in one enclosure; their USB 2.0-interface version costs just $350, less than Hitachi's raw drive.
But form factor is important for devices that can accept only a single hard drive, and in the drives included in basic consumer systems. For instance, a digital video recorder like a TiVo could store 1,000 hours of programming on a terabyte drive; adding an external drive is problematic (though possible) with most DVRs.
The more storage packed into a single mechanism, the cheaper smaller units of storage become as well. Expect the release of the 1 TB drive to cause 500 GB drives to drop even further in cost (they're already closing in on $100).
With the ongoing focus on video - particularly high-definition video - and the increasing resolution of still cameras, needing a terabyte of storage doesn't seem nearly as far fetched as it used to.