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In hosting terms, disk space refers to the amount of storage space (measured in megabytes or gigabytes) made available to you in order to host your website, website files and store e-Mail messages and attachments.
Depending on what your hosting provider allows, disk space is not allocated for storage of files, i.e using it as a back-up medium or sharing of files. Hosting space is generally used for the purpose of hosting your website, including images and other media (pointing to the site) as well as storing your e-Mails and attachments.
Should you see unlimited disk space advertised, you can be assured that there will be some other kind of limitation set on the hosting plan.
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