Some points:
1) 1TB is 930GB of USABLE hard drive space after formatting etc
2) My Windows 7 install, with NO games, eventually reached about 70GB
3) A DVD movie, or BluRay rip is on average 7GB
4) You should have TWO hard drives in a computer:
Drive#1: Faster, lower-capacity drive for Windows (7200RPM 500GB 3.5" or an SSD such as the OCZ Vertex 2 or 3 120GB but SSD's are expensive)
Drive #2: Slower, higher-capacity drive for backups, games and multimedia such as a 2TB 5400RPM Western Digital
5) How large your drives are depends mainly on whether you store a lot of video, or have a lot of video games. Many new games average 10GB.
6) It's HIGHLY RECOMMENDED that you purchase a program like Acronis True Image and setup automated backups if your main drive (main partition if it is partitioned). Periodically delete earlier backups to save space. If your main drive dies physically or has unfixable software issues (like viruses) you can then RESTORE your latest, uncorrupted backup. It's good to have a few backups.
7) I use STEAM for games. I have a main SSD drive for Windows (120GB OCZ Vertex 2) and a secondary 2TB drive for games, backups etc. I just made a folder on the 2TB drive called "STEAM" and that is where all the Steam stuff is. For non-Steam games I just install them to a folder called "GAMES", again on my second drive (SSD's are expensive).