Hard drives hold a vast amount of data; a moderate-sized drive can easily hold two or three operating systems and complete suites of system and application software. You can (in practice) run Windows 95, OS/2, and a flavor of GNU/Linux on the same machine (though not simultaneously without proprietary software). To separate different operating systems for the convenience of the boot loader (or for other useful but technical reasons), hard drives are often divided into partitions.
For historical reasons, a hard disk drive may have at most four ``primary'' partitions. For reasons of practical necessity, one of these may be designated as an ``extended partition'' and further divided into logical partitions. Windows views all partitions as separate disk drives ( C:, D:, ...), even if they reside on a single physical disk. GNU/Linux, by contrast, distinguishes between primary and logical partitions, and between physically different disk drives. The first physical hard drive is /dev/hda under GNU/Linux; its partitions are /dev/hda1, ..., /dev/hda4, and any logical partitions are numbered starting with /dev/hda5. The second physical hard drive (if any) is /dev/hdb.
A 2 GB partition is plenty to install everything on a GNU/Linux distribution CD, and less than 1 GB is enough to have a perfectly functional system. Much space is taken up by documentation, desktop themes (see below) and utilities for software developers. 500 MB is enough for a working installation with X, and 300 MB is probably adequate. If you have limited disk space or memory, you will probably want to use a ``thin'' desktop environment like IceWM or FVWM.
As mentioned above, a computer can use the hard drive as memory. GNU/Linux devotes an entire disk partition to ``virtual memory'' or swap space. Your GNU/Linux installation will therefore require at least two partitions.