Yahoo offers 100MB free and 1GB paid email
I know I'm late to the news(work, work work), but it seems GMail jumpstarted the market brains:
in Week in review: Net portal wars | CNET News.com
Yahoo will also begin offering "virtually unlimited storage" for its paid e-mail customers and will upgrade free users to 100MB from it current 4MB, in a challenge to Google's Gmail service. The upgrade is part of an overall enhancement for Yahoo Mail that will launch this summer.

