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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.

Until May 10 2005 the special feature of including dots in the email address wasn't available, but with growing competition from other free email providers like Gmail and Yahoo, this feature made available to users.

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.