Actually, I have an IBM hard drive in my iMac which has rated capacity of 123.5 GB (a bit unusual). It is model IC35L120AVVA07. I have another Western Digital "120GB" hard drive which, when formatted, is slightly smaller (112 GB versus 115 GB) than the "123.5 GB" IBM drive, so it really is a little bigger.
Also, it is important to note that you can put a 160 GB drive in there and 128 GB will be recognized. It may be wasteful, but someone may have a "larger than 120 GB" drive salvaged from a PC, or there may have been a really good "three coupon deal" at Best Buy on 160 GB drives.