A huge part of it is the practice of overselling. The basic idea is that you have n customers who all want k gigabytes of space, but on average they each use on

A huge part of it is the practice of overselling. The basic idea is that you have n customers who all want k gigabytes of space, but on average they each use only j gigabytes of the space. If that holds, then rather than having nk gigabytes available, you just need n(k/j) gigabytes to satsify their needs. After amortizing usage, the people who overbuy and barely use their space more than makes up for the users that max out their space. I don't know for sure if Dropbox does this, but most hosting companies do, and its a sensible practice (especially when your backbone is scalable). Pairing with that, nobody actually uses all of their space. If you see yourself getting within some percentage of your usage, one generally will buy more to keep from hitting that upper bound. Nobody likes being in the dangerous red zone. I believe dropbox also compresses your data serverside, so you really use up n*p gigabytes (where n is your local usage, and p is the compression ratio), but don't quote me on that.