Allow image upload – most efficient way?

In my site, I currently only allow users to import images from other sites rather than uploading it themselves. The main reason for this is because I don’t have much storage space on my host (relatively speaking). The host charges quite a bit for additional space.

What are the alternatives to hosting images users upload (max 1mb size)?

Would it be a good idea to purchase separate cheap hosting with “unlimited space” (I know that’s not true, but I’m guessing it’s more than 1gb)? Or are there some caveats with this approach (e.g. security since the site should not be browsable, but accessed via another server)?

Are there alternative ideas that I could employ?

Thanks for any suggestions

I use amazon S3 – its very cheap for storage and bandwidth, and pretty simple to set up:

http://aws.amazon.com/s3/

Also – it’ll grow with you.

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