It's all about the Gmail. Google continues to control the vertical and horizontal for nearly everything they touch, and Gmail's upgraded capacity of 2 GB of free email storage has set the target for other companies that want some of that sweet, sweet ad revenue from people who use webmail instead of their ISP's service. ISPs must be sweating a little, because unbundling email means that the pipe to the ISP is really just delivering water, not chicken soup, coffee, and bisque (to stretch a metaphor).
AOL is the latest entrant, and a surprising one. They purchased Mailblocks almost a year ago, a provider that offers challenge-response based email so that only recipients with human characteristics wind up in your In box. Mailblocks charges modest fees for its modest storage service, but AOL used their technology to build their free, 2 GB, AOL Instant Messenger (AIM) connected webmail. An AIM account will link to a webmail account. AIM accounts are free and self-standing and can be used with iChat.
<http://www.aim.com/>
<http://www.mailblocks.com/>
Yahoo upped its mailbox to 1 GB a few months ago, and offers 2 GB for $20 per year. Apple's .Mac service includes just 250 MB of storage for $100 per year, with 1 GB total available for $50 extra per year. Hotmail includes 250 MB - with only 25 MB of that available in the first 30 days - with 2 GB costing $20 per year.
<http://mail.yahoo.com/>
<http://mac.com/>
<http://hotmail.com/>
Of course, Google is still tweaking their approach. When they lifted the limit on April Fool's Day from 1 GB to 2 GB, they said it was only the beginning. And it's true. My mailbox keeps getting slightly larger. I have about 535 MB of stored mail (it's an automatic CC'd backup for my main account) and every day the upper limit rises slightly.