Well, you will need some space. It's not only about games. If you want to, say, download vidzone application to watch & hear free music online, you'll need HDD space. Also, when you play games, the PS3 stores information about the levels you've achieved so far, or the tournaments you've won. If you're not fussed about saving movies etc. like me, then 120GB PS3 is good enough for you.
If you want to future proof it (you never know what applications come on PS3 in the future, including online HD movies), then 250GB is a better bet.