Hm, this is interesting. Just recently they upped the cap to 512k, and now 1 MB? Now there's no reason to use Imageshack over this, unless you're feeling lazy about logging in or something.
Heh, I'll never use that much bandwidth though. I looked at the options page, and my bandwidth counter is set to reset in 3 days (I joined on the 17th of some month), and I'm using 0.11% of my bandwidth.
It's worth noting that you MUST go to the options page and manually set your new upload limit to 1 megabyte, otherwise you'll still be limited to 256k or so. I guess this is some effort to lessen the impact of allowing all free users so much extra stuff.