I’ll try to clear things up a bit.
“USB drive”, “USB memory key”, “Thumb Drive”, “Flash Drive” and other terms usually refer to solid-state small hardware devices with capacity from 1 or 2 GB up to 256 GB.
The 256GB one is quite expensive – nearly $800.00 on buy.com
The 320GB Iomega is a hard drive in an external case. It can be plugged into your PC’s USB port.
Some of these external HDs are reasonably small and intended to be caried about – the can fit in a pocket.
Larger ones can be carried, but they are a bit bigger, and usually will sit on your desk or shelf. Think of a really thick paperback book, like a dictionary.
“how come then “usb drives” come in capacities lower than “external drives”? i havent seen any over 500 GB“
“USB drive” will refer to a solid-state flash memory device. You will pay quite a bit more per MB for one of these than for an external HD enclosed in a case.