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Hotmail offers many of its members 250MB of free e-mail storage, be it used for sent or received e-mail. For a fee, customers can get 2GB of storage. In contrast, Yahoo! Mail offers 1GB for free currently, to all of its members with 2GB offered at a price, Gmail from Google offers over 2GB for free.

While Hotmail does not have POP3 email access, it is possible to check your email using Microsoft Outlook and Outlook Express on PC and Microsoft Entourage on Mac, using the WebDAV protocol. While this service was free for a number of years, Microsoft announced on September 27, 2004 that they were making it a subscription-only service for new users immediately and existing users from April 2005. However, users can get around this restriction using FreePOPs 1, a flexible free software application that allows email client access to webmail services through POP3.

Jack Smith first had the idea of accessing e-mail via the web from a computer anywhere in the world. When Sabeer Bhatia came up with the business plan for the mail service, he tried all kinds of names ending in 'mail' and finally settled for hotmail as it included the letters "HTML" - the markup language used to write web pages. It was initially referred to as HoTMaiL with selective upper casing.