Google announced that the app size limit will be increased to a generous 4GB, from the current 50MB. App developers will have the option to add two expansion files to an app, each up to 2GB. Google announced the intention to increase the restrictive limit of 50MB almost a year ago, at Google I/O in May 2011.
Many users have complained about the limit, especially when it comes to games or travel apps, that contain large amounts of data. To work around this restriction, developers linked content to their apps online. Imagine having to download 1GB of data from a third-party online source, when your carrier limit is 500 MB.
More over, Android has a refund window of 15 minutes, in which you can get your money back for an app you tried out and did not like or did not find useful. This standard timeframe seems decent, but when the apps is limited to 50MB the timer starts when those are downloaded and the app "installed". So the extra download up to the total size of the app (often some more hundred megs, or gigs even for games) take some time (and money, potentially - depending on your data plan). One could end up trying to app for real only after some 30 minutes have passed, missing the chance for a refund in case one decides against keeping the app on their Android.
So this is good news double time from Google, and the ever-soaring number of Android users are sure to appreciate the move, with apps getting more and more complex and more demanding storage-wise.
Other indirect benefits for the users are that the total size of an app can be seen in the download window on Google Play (Android market).
Note for older devices with Android: you may not benefit from the change, as older Android versions still download the content from external sources. However, these sources will now be Google powered. This means two things: higher speed and safety, as well as no usage on the bandwidth limit from your carrier, if Google is unlimited on your contract.
This change also lightens things up for developers, as they are allowed to store more (or all, in most cases 4GB is more than they need) data over in Google's closet, freeing up space on their own servers to make room for future goodies aimed at us Android lovers.
Source: Android Developers Blog.