For those of you that have watched today's Nintendo Direct broadcast — you can check it out here — you'll have seen lots of graphics of external hard drives, Wii U systems and some interesting demonstrations with large science lab-style glass jars. There was some pretty good news from Satoru Iwata, and a few small things that may frustrate.
For starters, Wii U will support hard drives up to 2TB in size, which is a hefty amount of memory and a useful option for those keen on buying a lot of retail download games, in particular. One downside is that the drive will be formatted for Wii U when setup, and you won't be able to switch it back and forth with other devices, such as PCs. That makes sense from Nintendo's perspective, in terms of maintaining security and countering a potential back-door for hackers, but will likely mean that you'll need to have a hard drive exclusively for your Wii U.
Interestingly, it was demonstrated that games stored on the system and the external device will both be displayed on the Wii U home menu, strongly suggesting — practically confirming — that games will be playable straight from a hard drive; that'll be a relief to many after some doubt that briefly emerged earlier in the week. Satoru Iwata did outline that the best option is a hard drive with its own power source (ie a plug of its own); hard drives with two USB cables, or flash USB drives, come with warnings that they won't necessarily be the ideal solution, even if they'll technically work.
As previously reported, it was also clarified that SD cards can be used to store Wii, WiiWare and Wii Virtual Console data, but cannot be used for any Wii U save data.
If you're going to be downloading a lot of games, it looks like external hard drives will be a must, as even 32GB (29GB available after system setup) on the premium console won't last for too long.