According to Eurogamer, Microsoft has announced that the Xbox 360 120GB hard drive has now been discounted to €129.99 ($180) in Europe and £79.99 ($125) in the UK. Curiously, the Microsoft representative appended "while supplies last" to the announcement, implying that the 120GB won't be around for much longer. This news comes on the heels of a standalone 250GB hard drive being announced for Japan. When asked whether that drive would release outside of Japan, Microsoft informed Joystiq that it had nothing to announce at the time.
If the separate 250GB drive did become available elsewhere and the 120GB were discontinued, consumers would have to choose between 60GB and 250GB add-ons. As Microsoft's typical strategy has been to replace the lowest end of its hardware spectrum, it would make more sense to discontinue the 60GB drive instead.
Then again, as we've learned time and again, sometimes that strategy can be typical Microsoft.