Quoting from the Wikipedia article on Web Storage:
Web storage can be viewed simplistically as an improvement on cookies, providing much greater storage capacity (5MB per domain in Mozilla Firefox, Google Chrome, and Opera, 10MB per storage area in Internet Explorer) and better programmatic interfaces.
And also quoting fron a John Resig article (posted January 2007):
Storage Space
It is implied that, with DOM Storage,
you have considerably more storage
space than the typical user agent
limitations imposed upon Cookies.
However, the amount that is provided
is not defined in the specification,
nor is it meaningfully broadcast by
the user agent.
If you look at the Mozilla source code
we can see that 5120KB is the default
storage size for an entire domain.
This gives you considerably more space
to work with than a typical 2KB
cookie.
However, the size of this storage area
can be customized by the user (so a
5MB storage area is not guaranteed,
nor is it implied) and the user agent
(Opera, for example, may only provide
3MB - but only time will tell.)