Gmail has started upping its storage size to two gigs. It seems to be happening gradually, but if you look at your main screen and choose new features, you should see it.

Here's what the help screen says:

G is for growth Storage is an important part of email, but that doesn't mean you should have to worry about it. To celebrate our one-year birthday, we're giving everyone one more gigabyte. But why stop the party there? Our plan is to continue growing your storage beyond 2GBs by giving you more space as we are able. We know that email will only become more important in people's lives, and we want Gmail to keep up with our users and their needs. From Gmail, you can expect more. We're not in the plains anymore Fonts, bullets and highlighting, oh my! Gmail now offers rich text formatting. And over 60 colors of the rainbow. Discover a land of more than just black and white.