Ed Yourdon recently posted his take on yesterday's new iPod announcements from Apple. Oddly, he spends most of the article complaining that an iPod that can store 40,000 songs holds enough music to listen for eight hours a day for a year without repeating anything. Yet, he goes on to talk about how he has six different "exercise" playlists to suit his energy level and seems to not connect the dots.
Most folks don't listen to music collections sequentially, they listen to music that enhances their mood at that moment. Moods change throughout the day, so access to a wide variety of music makes the listening experience much more enjoyable. If you can only fit a few songs per "mood," then the device provides limited satisfaction, and similarly, if you can only fit a good selection of music to fit one mood then the device provides no satisfaction for other moods. So, give folks with large music collections an easy way to carry it all with them all the time, allowing the iPod to satisfy in all circumstances.
Two other points: This large storage capacity also allows folks to move up the fidelity scale, from 128kbps encodings to 256kbps (or even lossless). It also is probably the tail end of the storage expansion. We've gone from 5 GB of the original iPod to 160 GB in the new "classic," but Apple's introduction of WiFi is a step towards making the iPod a universal access device. Sure, it can store a lot of music when you aren't connected, but when you are connected you'll be able to reach out to either the iTunes store or (eventually, probably) your own music collection and pull down whatever you want. That, to me, seems like the next real innovation in how people access their music.