MSDN: Configuring site collection quotas and locks

Quota – the storage limit value for a site collection – including all contents in all sites
Quota – storage size that, when reached, triggers an email alert.
Quota can be saved as a quota template and apply to any site collection. Simply setting storage limits on new site collections.

If version is enabled, the versions in a site
and the content in the recycle bin
also counts toward limits!!!!!

To change quota for a site collection, you can: Central Admin à Site Collection à Configure Quotas and Lock,

You can either use Individual setting (custom) or select from one of the template.

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