Hard drives are becoming more and more important. PS3 let's developers add installs to the harddrive to cut down on loading times, and the 360 will start doing the same soon if I understand correctly. So let's say you have a 20GB hard drive, and you have 5 games with 4GB installs, that's your entire hard drive there. If you want more you'd have to delete things to fit the next game on. This also doesn't include if you want room for pics, movies (PS store now has a video section as well), demo's, music (PS3 can rip your cd's onto your hard drive), save data, and so on.
I think that's a big reason the 20GB was done away with, no one was buying it as they were buying the 60GB version. Then they upped the 60GB to an 80GB, and came out with a stripped budget version which was the 40GB. They then just decided to do away with the 40GB and just release the 80GB.
Even at that ppl still buy extra hard drives and hook them up to their PS3's because hard drive space can dissapear quick if you're not careful.