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Source: http://en.wikipedia.org/wiki/Object_storage
Object storage: Sinkhole where you dump files which are then retrievable via an endpoint, usually an HTTP API.
Programmers love that kind of stuff, much easier to build scalable apps around an API than a filesystem.
@Saahib - its a way of having an online data storage without having to worry about setting up, scaling or maintaining of the underlying platform.
For example, Delimiter's (Yomura) S3 platform lets you create a certain amount of hostnames in the package for example:
images.domain.com
downloads.domain.com
So you can segment your data into 'buckets'. Then set parameters to make buckets public, private and so on.
Lets say you were producing a new game, you wanted to make available an upgrade but you knew you would be hammered by 500,000 people trying to download it. So you could either scale out 20-30 servers to handle the peak traffic or just stick it on an object storage service eg downloads.domain.com then point customers to download it from:
http://downloads.domain.com/myupdate.zip
All the download traffic would be served from the object store. Its then down to the operator of the object store to scale sufficient heads to handle the traffic.
You pay storage + bandwidth which is a lot cheaper for dynamic workloads.