2.5 inch drives are physically smaller and require no mains power supply so are more portable but are not available in very large capacities
3.5 inch drives are physically larger in size and require a separate mains adaptor to power them and are availble in much larger capacities than 2.5 inch drives.
As for the capacity of the drive, go for as large as you can afford.
Tescos actually do some very good deal on external hard drives.
http://direct.tesco.c...=49&btnResultSort.y=6