I never really considered that digital data is actually encoded as an analog signal. Magnetic data on a hard drive is supposed to be 1s and 0s, but magnetism can be unreliable at the microscopic level of a hard drive platter. Those 1s and 0s have to be stored in larger groups, so that if a few individual bits flip, the end result will still be mostly 1s or mostly 0s. Error checking is introduced into each section of data, and that overhead means that only about 81% of a disk can consist of your data -- the rest is error checking. New drive technology is striving for 4% overhead, so that you'll get to use 96% of the disk drive.
And Windows XP won't support the new drive format.