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It's for games that are huge and need patching or the ability to update with levels and crap. Newer games will probably have support to save games to the hard drive.
At this exact moment the only games that use the hard drive are Playonline Games because they need to be installed to the Hard drive and take about 26 gigs. GTA4 is rumored to have HDD support because you can download tracks and race online. But it's not due out till Christmas.
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