The Nintendo Revolution will not feature an internal hard drive. Instead, the unit will utilize 512 MB of flash memory and built-in SD memory card support. In addition, Iwata's remarks imply that Nintendo intends to, ultimately, leave the best storage solution up to the consumer's discretion — a freedom that could give Nintendo an edge (in terms of consumer satisfaction) over Sony and Microsoft. For example, a quick search on Circuit City's website yields Seagate's 160 GB external drive for only $60 (with rebate). Compare that to Microsoft's $100, 20 GB 360 HDD (also manufactured by Seagate). No contest.
Memory options will be important for gamers looking to stockpile the Revolution's Virtual Console titles. Iwata noted that aside from classic games, Nintendo plans to issue new titles through the download service as well. But does the storage freedom mean a loss of security for Nintendo? That is, will this decision increase the prevalence of homebrew apps, including emulators that already run all of those classic games, on the Revolution? It's a tough call.
[Thanks for the artwork & additional info Rosco!]