Selecting an external hard drive should be a painless, straightforward process. The hard drives used externally are typically the same units that are used inside of your desktop or laptop computer, so the factors to consider are similar to those you would consider with a regular internal drive. And of course, there are a couple of extra issues to consider because of the external nature of the device.
We all know size matters, of course, but because large drives are very affordable now, other factors matter more. Get yourself a drive that has at least 3-4 times the capacity of the data you would like to store on it. Your storage needs will increase as time goes on and you need to leave yourself some room to grow.
Storage has never been cheaper! These days you can get tons of space without breaking the bank and the prices are only getting better and better as time goes on. You can get large quality drives for under $100 so don't overpay.
This is a big one. Make sure you get at least a 3 year warranty, 5 years is even better. Be wary of any drives that only have a 1 year warranty.
If you are primarily using the drive for backup purposes, 5400 rpm drives are perfectly fine. If, on the other hand, you are planning on running programs off the drive and using it for day-to-day usage, 7200 rpm drives can offer a nice speed increase (20% is typical).
Your drive's performance will be directly related to the rotational speed and the cache size. Larger cache will give you better performance...but if performance is not high on your list of priorities, don't bother paying more for larger cache or higher speed.
USB 2.0 and Firewire are your only 2 real options here. What you should get depends on the interface your computer has. If you have both firewire and USB, go for a drive with firewire for slightly better performance.
Since you'll be storing your critical data on it, you want it to last. Stick to the name brands and do some research online before you buy your drive. Check out sites with customer reviews such as amazon.com, epinions.com and cnet.com and see what other people are saying. You should be able to quickly get a clear picture of a drive's quality.
Decisions in this realm really depend upon your needs and personal preference. Full size drives (3.5") can be less expensive, but they will require more space on your desktop and AC power to run. Compact drives (2.5") can fit in your pocket and often times are powered by the USB or firewire cable (no AC adapter needed). These days you can get drives in all sorts of different shapes and colors, but really this should one of the last factors affecting your decision.
Once you have considered all of these factors, you should be able purchase an external drive with confidence.