The Guinness Book of Records says that the world's smallest hard drives are Toshiba's 0.85-inch HDDs. These drives hold 4GB and will be produced by the end of this year for use in digital camcorders and mobile phones.
The 0.85-inch drives are the size of a stamp. Apple's iPods currently use Toshiba's 1.8-inch hard drives.
Guinness World Records science and technology editor David Hawksett says "Toshiba's innovation means that I could soon hold more information in my watch than I could on my desktop computer just a few years ago." Source