I prefer using USB external hard drives since I don't run out of space using them as often compared to using USB flash drives. Plus, there is no cap to lose, and if the USB metal plug connector gets broken. I just need to buy a new cable, or new external hard drive case for my drive, and I can reuse the drive.
Since USB external hard drives carry more file storage possibly for audio and video files, I would buy those. But I still use the small USB flash drives for storing photos and documents. Depends on what they can be used for, whether for office or entertainment use.
Indeed, I see external hard drive better for entertainment especially with the popularity of HD videos, and high-bit rate MP3s like 320 Kbps and Flac audio files which can take up GBs of space which can fill up a 8GB USB Flash drive very fast.
It is amazing how 100 dollars can buy about 2000 GB/2TBs of space if there is a sale on. I remember back in the 90s a 200GB external drive cost 100 dollars.
I used to use USB drives a lot to carry my homework back in college, but now with E-mail with space of 1-7 GBs or more in size for attachments, Facebook, and other social networking sites I tend to be less likely to go to someone's house to share photos, home videos, and text documents.
The one handy thing a USB flash drive is good for is storing installer files to someone's house to help them remove spyware, virus, and other junk programs when their computer can't go online because a virus is preventing them from going online.
Indeed, especially when buying drives bigger then 16GB since 16GB flash drives can cost 100 dollars while 1000GB USB drives cost 100 dollars or less at most stores.
