Apps *have* to be installed to internal storage. For many, that's no big deal as most apps are pretty small in size; but if you're into games, they can start to take up space quickly.
Obviously media storage needs vary from user to user, but you can also add an SD card to offload those types of files from the internal builtin storage if desired.
I have a 16GB S3 with a 32GB SD card. To be honest, I don't even come close to using it all. I don't have any game apps, and while I have a decent amount of music in cloud storage via Google Music, I don't really have that much saved to the device. I also don't really take that many pics or videos, so for me storage isn't that big of deal. For me, nandroid backups seem to consume the most of storage, if we're being honest -- but I clear out old backups regularly anyway, so even that's not a big deal.