I guess this is related to your other thread:
quote-needed-for-hard-drive-repair-recovery-t23226.htmlbut I'll reply here instead of there, since that seems specific to getting a quote for a fix.
Rick Cole wrote:What does it mean when a utility reports the incorrect size of a hard drive?
That depends on exactly what "size" that specific utility is reporting - I can think of at least 4 possibilities.
Rick Cole wrote:I see it all the time
That is not my experience - when the exact meaning of the reported size is understood.
Rick Cole wrote:but what causes this?
That depends on what "this" is

More diagnosis needed IMHO. As I said, I don't see your reported behaviour "all the time" at all. It would be interesting what pattern you can find in the disks reporting this e.g. similar reported "new" capacity? Or similar reduction from normal capacity? Or similar action immediately before the problem is seen? Or similar machine type in each case? Or similar disk model in each case? etc. See what I mean?
Rick Cole wrote:Right now I have a 640GB Western Digital and for whatever reason, it shows as 250.2 GB in Disk Utility (Mac program)
I don't work with Macs, but on a PC, I'd start with MHDD or HDAT2 etc. and look for an HPA or DCO on the disk, as well as checking what the disk reports in an Identify Device response. Then proceed from there...