It holds saved games, photos and downloaded stuff, such as VC games. If you don't buy any VC games though, the measly 512mb of space on your Wii should be fine.:sick:
And, possibly in the future, that SD card could contain full gaming content.
Just like the old consoles, insert cart, machine reads it into memory and the game starts. SD card could work the same way. So in essence, you could have a full library of every single wii game on SD cards. An infinite storage idea that holds as many games as you want.