Thanks to Yahoo! Mail VP John Kremer's announcement of unlimited email storage from Yahoo, the Apple iPhone will have unlimited storage as well. The current email storage is 1GB for free users and 2GB for paid users, but everyone will be able to get infinite storage now. Paid users can get a $20 refund if they ask.
The upgrade starts in May, and Yahoo will actively warn and suspend email accounts that are "abusing" their unlimited status. That means no using it as disk storage or backup (unless you do it sneakily).
Technically the iPhone's storage won't be "unlimited" even using IMAP to only download headers, but at the rate you fill up the 8GB of flash storage, it's essentially unlimited anyway.