When the Xbox One was first revealed in May, Microsoft stated that users would be able to expand the system's internal hard drive with an external USB storage device. But, when it first releases it won't have this functionality because Microsoft are confused all the time.
Speaking during a live podcast recorded at PAX this weekend, Xbox Community Manager Larry "Major Nelson" Hryb said that, while the external storage feature is being worked on, "my understanding is that feature will not be there at launch because the team's working on other things. It's definitely on the list; I don't know when it will come in, though."
This will most likely result in most people waiting till next year before they buy the console because my guess is this will be one of many things for Microsoft to me up.
In comparison, according to Sony Head of Worldwide Studios Shuhei Yoshida, the PlayStation 4 will not support external USB storage for installed games, but PS4 users will be able to replace the 500GB internal hard drive in the system with expanded storage. (The Xbox One will not offer direct physical access to the internal hard drive for replacement.) Nintendo's Wii U supports external USB hard drives of up to 2TB in size.