Your best bet is a CDN (read more about CDN at Wikipedia) You are "paying as you go" which will save you in cost compared to a dedicated server. It will perform better for your customers because they get the files delivered from a server on the CDN network that is geographically closer (optimal), compared to a dedicated server in just one location.

Wolfire recommends Amazon Cloudfront: 17c/GB, Pay As You Go, speeds are ~ 25MBit/s

The Yankee Group's 2009 CDN Scorecard breaks out like this:

• Rackspace Cloud (resells Limelight #2, tier 1): prices 22c/GB

• Aiso (reseller for Edgecast #3, tier 2) : 20c/GB

• VPS (reseller of Highwinds #6, tier 2): starting at 7.5c, you can get as low as 5c/GB, Pay As You Go, speed ~8Mbit/s, neat interface.

Something to keep in mind is Steam's Hardware Survey (Dec 2009):

• Unspecified (-3.39%) 18.95%
• 33.6 Kbps (-0.07%) 0.53%
• 56.0 Kbps (+0.02%) 2.11%
• 112.0 Kbps (+0.03%) 1.14%
• 256.0 Kbps (+0.40%) 9.41%
• 768.0 Kbps (-0.16%) 11.89%
• 1,024.0 Kbps (+0.07%) 5.53%
• 2,048.0 Kbps (+2.85%) 34.61%
• 10,000.0 Kbps (+0.25%) 15.83%

So 80% of gamers have a 10Mbit/s or less connection.

If you are aimed at the casual audience, their connection speeds are far inferior (90% 3Mbit/s or less) OECD report from Sep for US households.

Special Thanks to Andrej Vojtas for doing all the research.