This is a great question and one that I'm frequently asked. I was talking to a friend recently who's doing a masters in landscape architecture so you can imagine the size, variety and importance of the files she's working with. Sadly, her university gives her only a tiny amount of storage space on the server - something like only 50mb. Also, the university warns that she shouldn't use USB drives "because they are unstable and you might lose them" What can she do?
OK, it's not launched yet but in principle this looks like could help her enormously. This is what the site says:
Password-protected online file storage. Always available where you need it.
When you sign in to Windows Live Folders, you're in charge
For more information take a look at http://folders.live.com/WelcomeMoreInfo.aspx