If you have an INTERNAL 2.5" disc, you need to make sure it is formatted to the format spec "fat32".
If you have en external disc, well I do not know if it needs to be a fat32 disc, but you can not install the OS on it. However you can use it as long as it is USB. I have hooked up many drives to my PS3 (including an ipod) and they all work.
If you want to hook up a USB drive, you can use it to store movies, music, pictures, I am not sure about games but probably.
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