Latest word is that the Xbox 360 will be released in differing versions over the next five years. The hard drive has been an area of discussion, analysts predict that the console will launch in two varieties, one with and one without a hard drive.
Supposedly, developers have been told not to rely on the hard drive. We could assume that the primary use of the storage will be for added multimedia functionality that Microsoft has up its sleeve. It has also been rumoured that later versions of the Xbox 360 will be shipped with the added benefit of an HD-DVD drive.