Microsoft is offering free 5GB storage with Office Live and 25GB with Sky Drive. Of course you need a Windows Live ID or Hotmail. You can keep your files private, public or share them with people you choose. You can upload almost any type of file with few exceptions. The current upload capacity per file is 50MB.
With Office Live Update, you can access your online documents directly from Office applications.
Apparently they have been offering this for a while and I was totally unaware of this. I must have been living in a cave.