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Both the PS3 and 360 are built so they can be used as media centers. And on the PS3, many games come with a mandatory install, and the 360 allows you to install retail games for faster loading. As your library grows, you'll need the space if you're going to be doing installs.

I've got a bunch of things on my PS3, music and videos mainly, so I don't have to rely on my PC for it.

Also, WiiWare games are restricted in size. I think they're only allowed to be 50 MB or something, which is almost nothing. Lara Croft and the Guardian of Light is almost 2.5 GB.

I've got 42 GB free space on my 250 GB PS3, and I do delete stuff every now and then.