First, usb is a communication and power protocol. It can be used in many ways. Its just a cable style with power that runs through it.
Now,
USB key drives use highly advanced flash memory. There is only so much you can pack on to a little card.
A USB external drive is just that. A hard drive that connects to your computer with a USB cable. That is, it doesn’t need to be plugged into the wall for power like say an old printer. The electrical power to the drive as well as its communication comes from the cable to the computer.