In the past year, the price of external hard drives has fallen dramatically.  While you're still looking at around 100 euros (125 USD / 85 GBP), you now get around twice as much money as you did a year ago.

500 GB is increasingly becoming a standard size and smaller 120 GB and 160 GB drives are less and less common.

Speeds

When you've got this much data to push around, the speed with which it's transferred to and from your external hard drive is important.

Fortunately, speeds are increasing too, and not just the amount of data you can store.

In particular, two standards--FireWire and eSATA--which were initially reserved for professionals are increasingly available to the general public.

These connections promise speeds of up to 80 MB/s, meaning it takes less than a minute to copy the 4.5 GB found on a standard DVD.

Who's going to burn a disk when you can write and re-write that fast for less money?

Size

Two main sizes of external hard drive exist: 2.5'' and 3.5'', but these sizes refer to the disks themselves--the enclosures that they come in are inevitably somewhat larger.

As ever, some manufacturers are more prone than others to add unnecessary bulk.

Apart from the diameter of the disk platters thamselves, and the impact that this has on the size of the whole product, there's another key difference.

In general, 2.5'' can run without a separate external power supply, although this is never the case for 3.5'' drives.

When using them with an eSATA cable, though, they might need to be plugged into a USB port too to receive enough power.

Other Factors

Although the speed of an external hard drive is likely to have the biggest impact on its eventual usefulness, don't forget that there are other factors at play too.

The amount of noise it makes is one, as is the amount of power it uses. 

Finally, you might also want to consider the looks of your drive enclosure, espeically if you're likely to have it sitting on your desktop all day.