By continually refining methods and technology, by constantly evolving and pushing and exploring new areas of technology.
One of the earlier breakthroughs was using perpendicular recording – this aligned the magnetic domains vertically (perpendicular to the platter) rather than having them lying down. They then took up less space. This was such a big thing that Hitachi even released a video back in 2005 showing how awesome their technology was:
A newer version of this technology is called Shingled magnetic recording – where the bits are stacked partially on top of each other – this was introduced in 2013 and provided up to 25% greater capacity in the same area.
These go hand-in-hand with software improvements in how the controller records and then reads data to and from the drive. You might think there are 1s and 0s stored on the drive, but at the lowest level the drive is writing an analogue signal that’s processed by powerful DSPs to determine the most likely digital pattern that matches the analogue signal it gets back from the drive. Data is no longer neatly stored in individual, discrete magnetic domains, but rather using a constantly varying analogue signal (yes, your digital data on your hard drive is, at it’s very lowest level, an analogue recording). This is called Partial-response maximum-likelihood.
There are other technologies like filling a hard drive with helium so the drive heads can fly closer to the platter – helium molecules are smaller than nitrogen and oxygen molecules, and they’re slippery, so the drive heads can float closer to the surface of the disk.
For SSDs, increased in recording density are coming from the shrinking of the processes used to make the flash chips – this is driven off advancements in making features on CPUs smaller and it flows along to flash and dynamic memory. You’re also likely using MLC (Multi-level cell) flash chips where one cell in a flash chip can store 4 different voltage levels, thereby storing two bits of information (00, 01, 10 & 11) rather than just storing just on or off – this immediately doubles the capacity of a SSD but it also reduces it’s lifespan. Enterprise SSDs are more expensive, partly because they generally use SLC (Single-level cell) chips.