In recognition of higher data speeds and caps, Google’s upped the limit on apps to a whopping 4GB, although not quite all at once; you’ll be able to download them as a starter 50MB app and then via 2GB expansion files.
As per the Android Developers Blog, the new system will work as follows for developers:
The size of your APK file will still be limited to 50MB to ensure secure on-device storage, but you can now attach expansion files to your APK.
Each app can have two expansion files, each one up to 2GB, in whatever format you choose.
Android Market will host the files to save you the hassle and cost of file serving.
Users will see the total size of your app and all of the downloads before they install/purchase.
On most newer devices, when users download your app from Android Market, the expansion files will be downloaded automatically, and the refund period won’t start until the expansion files are downloaded. On older devices, your app will download the expansion files the first time it runs, via a downloader library which we’ve provided below.