By now the benefits of a DVR are well known, and most people reading this review know about the award-winning Tivo experience - I'll not spend time describing how it all works (but trust me, it's great! - you'll come to hate it when forced to watch 'live' TV without Tivo). If my guess about your knowledge is wrong I'd advise going to the Tivo website and reading all about it.
Instead I'll mention why I paid the extra for the XL Tivo when there are other, cheaper options.
First off this is the fourth DVR I've used (fifth if you count the Tivo Series 2 I bought my parents years ago). My first was a 160-hour ReplayTV (no longer available), and I loved it. As you'd guess when you have 160 hours to play with you have a lot of options. I was first afraid I'd become a TV addict, recording and watching far more TV than I ever did before - and in the first month or so that was basically true. Over time, however, you find your habits change - I eventually grew tired of recording every show ever broadcast, and instead used the capacity to only record my favorite shows, but with multiple episodes. That is, if you have a ton of room you don't have to watch 'ER' every Thursday at 10 - you can read a book instead until you're tired, then just hit the sack. Only when you're in the mood will you fire the DVR up, and you'll find multiple episodes of your favorite shows to watch. I actually found I was watching less TV, or at least TV on fewer evenings, with the large capacity DVR - I'd broken the habit of sitting down in front of the boob tube at 8 to be fed by the networks (and waiting through their commercials).
Well when the HDTV switch came around and I started using the DVR from my cable company and it's 15 hours of High Def capacity, I went from DVR bliss to recording-management he$$. I could not record much at all, and so instead I seemed to spend all my time massaging my recordings (recording repeats at a later time to free up space now) or, what was worse, finding myself trapped between watching a show when I wasn't in the mood or finding it gone the next day. Also, obviously, I couldn't record near as much a variety as before.
Now comes the Tivo HD XL, which gets us back in the 150 hour territory. Yes you can get a cheaper Tivo and then purchase an add-on 500GB 'DVR Expander'(rumors of larger coming soon), or perhaps void your warranty, open the box, toss the old HD out and replace it with a third-party one - but after doing a number of hours/dollar calculations I found this XL was cheaper than a lot of solutions, didn't void my warranty, and didn't rely on hooking up yet another piece of equipment and cabling just to get me what comes out of the box with the Tivo HD XL.
My only cons, and these apply to all versions of the cable Tivo: 1) Requires a cable card (or two) and the inherent hassles that come with a cable 'technician' visit (mine went well, but many apparently don't) and 2) Tivo has ads that don't get in the way of the functionality (you don't have to watch them) but which still annoys me. The first con is not Tivo's 'fault' - the second is, and is why I don't give the product a 5-star.