Is this an opportunity for somebody? I want a hemi-terabyte model, and they'd been getting bigger and bigger. But now they got smaller, and one size fits all.

Our good friends at dvice capture it pretty well:

Apple discontinues 160GB iPod Classic, new model holds only 120GB… WTF?

What just happened? Apple's iPod Classic — the one that looks the most like the original — used to come in two sizes: 80GB and 160GB. Today Apple upgraded the smaller model to 120GB ($249) but discontinued the larger one? Huh?

Have we reached the upper limit of how much space someone's music collection can possibly take up? That's doubtful, and in any case, we could use more room for storing our songs in lossless format, thanks very much. Why no 240GB version, Apple? Then you'd still be the big dog, and we'd still be on our way to a 1TB iPod. Stop trampling on my dreams!

Apple also introduced Genius, a new feature that automatically creates playlists from songs in your library, based on user preferences about which songs go great together. Additionally, you can synchronize your Genius playlists with Apple's own iTunes 8 servers, which will then analyze and combine your information with other users' Genius playlists. iTunes 8 will handle your Genius playlists anonymously. The master plan is simply to use this feature in order to come up with targeted buying recommendations for you, based on a large database of Genius playlists.