Google has massive arrays of machines in data centers around the world. They also cache every page that they have in their index. They have lots of storage available.
Like people have said, very few people will reach 1GB of email. If I used it, i'd probably not go over 10MB or so - I keep my email accounts pretty clean, deleting stuff I don't need any more. Even if I didn't, text compresses very easily. Attachments take up a bit of room, but if 1000 people have the same attachment (eg funny cartoons that get emailed around) they only have to store it once.