Capacity
The 80GB hard drive is larger than the 40GB hard drive, therefore more games can be saved and more complex characters can be created. Also, the extra hard drive space allows for more downloads, which provides for a smoother online gaming experience.
Backwards Compatibility
Only the original 80GB console offers backwards compatibility, meaning it can play games from the PS and PS2. The 40GB console does not offer this feature, and the newest versions of the PS3 console, the new 80GB and 160GB versions, do not offer it either. If you own older games, but no longer have the old game console, compatibility is a factor to consider.
Availability
The original 40GB and the 80GB PS3 consoles are no longer being produced. However, used or refurbished systems can still be purchased at gaming stores such as Game Stop and online on eBay or Amazon.com.