What is a Megabyte?
When people talk about bytes and megabytes, etc., in relation to discuss quantities of data, or space it can be difficult to comprehend. We speak of a kilobytes, megabytes, gigabyte, terabytes, etc., without really knowing what it represents.
The following table shows various quantities of bytes, in each power of ten. Usually, they are shown with multiples of 2 and 5 also. For example, 1 Kilobyte, 2 Kilobytes, 5 Kilobytes.
All the examples are approximate and are rounded. For example, a computer card has 80 columns. If 50 columns contain data on a card, then two cards will be 100 bytes. Also, a 3-1/2 inch diskette can contain 1.4 Megabytes. Showing it as 1 Megabyte reflects both (a) the diskette not typically being filled and (b) rounding. Finally, a CD-ROM can hold more than 500 Megabytes. However, it is listed at that level as "typical" and as the closest match.
Bytes (8 bits)
In plain English

Kilobyte  = 1,024 bytes

Megabyte = 1,024,kilobytes (Kb)

Gigabyte = 1,024 Megabytes (Mb)

Terabyte = 1,024 Gigabytes (Gb)

Petabyte = 1,024 Terabytes (Tb)

Exabyte = 1,024 Petabytes (Pb)

Zettabyte = 1,024 Exabytes (Eb)

Yottabyte = 1024 Zettabytes (Zb)

Why doesn’t my hard drive format to it’s actual size?

When a 500Gb drive is formatted it finishes up as 465Gb of useable space physically. A 1Tb (Terabyte) drive formats out to approx. 980Gb usable space.
Different operating systems label things differently and even format differently according to the format require, e.g. Mac = HFS+; HFS+ Journaled; Windows = NTFS, etc/ . Mac OS X 10.6 actually uses the SI definition of a gigabyte, so your 500 GB (advertised) drive will be listed as "499 GB" or even "500 GB". Windows 7 using NTFS formatting will see the 500Gb drive as 465Gb. The difference is quite insignificant really.

It's the difference between binary and decimal numbers and the use of SI units. The computer is calculating the binary number and the box shows the decimal number. 1 byte in binary is 2^10 = 1024 The closest decimal number is 10^3 = 1000. 1 gigabyte in binary is 2^30 = 1,073,741,824 The closest decimal number is 10^9 = 1,000,000,000. The drive manufacturers use the decimal number taken from the binary number. So it is that even though you may have a 500Gb, or 1Tb or even 3Tb Hard drive, there is ever only a smaller quantity of useable space in that drive simply because it has to be formatted according to arithmetic principles.
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