Well, if you consider it, unlimited office documents probably isn’t all that much space for most people, unlimited photos - again, probably not all that much space, and then the real meat, a 25gb space in the cloud, which is pretty much making it the new standard for free space in the cloud.
I don’t think it’ll eliminate any caps, but it might raise some. I’d just like to see Microsoft do something similar to Apple’s upcoming music archive.
Microsoft already does it - it’s called SkyDrive. You have 25 GB now, and they’re eliminating pictures and Office docs from that amount.
SkyDrive is natively integrated with Windows Phone 7, and on your desktop is just another drive - except it auto-syncs with the cloud server and any other devices you have synced to that same drive (meaning it’ll replicate files across multiple computers).
There’s also Zune, where Zune-purchased music doesn’t count against your storage - just like Amazon with its storage and music server. But with Zune and Amazon you can stream your media from the cloud - no need to download copies to your local device to play (like required with the Apple solution). So it really does extend the size of your local media player by your cloud storage (since you can navigate and stream instantly) - and with the Microsoft and Amazon solutions having unlimited storage of music you have, in essence, and infinite capacity for that music.
In this space, Apple is the Johnny-come-lately, as Microsoft, Google, and even Amazon have had this kind of service available for a long time.