I'm running close to a TB total (internal+external), with plans to add another 600~800 GB by the end of the year. I like to keep all of my original discs mint and unused, and enjoy multiple redundancy, so I backup DVD and CD images to my HD in addition to burning copies to optical media. I've also got about 200GB worth of video encoding work I'm doing, and the rest of it is raw and fansubbed anime (another 300~400 GB).
Most of my HD space goes to image files though. It's particularly handy to have images of all of your installation CDs on your HDs so you can just mount them and go instead of hunting through old boxes like I always used to have to do (and wondering whether I perhaps threw the CD out by accident :/). Since I don't play that many games, it's also convenient to just set up half a dozen virtual drives and mount the CD images for all the games I play - never have to worry about swapping discs, or deal with drive read times (and the noise associated with optical drives).
In all honesty, TB-level disk space is just nice to have - it's not at all necessary by any means (for personal use, anyway).