Two definitions, both correct
Computers address memory in powers of two, so 1,024 is the natural round number in binary and early convention borrowed the metric prefixes to describe it. Kilo meant 1,024 rather than 1,000, and everyone in computing understood the shorthand.
That worked while the discrepancy was small. At kilobytes the gap is 2.4%; at megabytes 4.9%; at gigabytes 7.4%; at terabytes 10%. Once consumer storage reached those sizes the difference became large enough to matter commercially, and the ambiguity stopped being harmless.
Why your 1 TB drive shows as 931 GB
Storage manufacturers use the decimal definition, so a drive sold as 1 TB genuinely contains 1,000,000,000,000 bytes. Windows and most file managers report using binary units while labelling them GB, so they divide by 1,073,741,824 and display 931 GB.
No storage is missing. The drive holds exactly what it says; the operating system is dividing by a different number and using the same label for the result. macOS switched to decimal reporting in 2009, which is why the same drive shows as 1 TB on a Mac and 931 GB on a PC.
Formatting does consume a small amount of real space for the file system, but that is a fraction of a percent — nothing like the 7 to 10% the unit difference accounts for.
The IEC units nobody uses
In 1998 the International Electrotechnical Commission created unambiguous binary prefixes: kibibyte (KiB), mebibyte (MiB), gibibyte (GiB) and tebibyte (TiB), each a power of 1,024. Under that scheme, kilobyte means exactly 1,000 bytes and there is no ambiguity at all.
Adoption has been patchy. Linux tools and some technical documentation use them; consumer software largely does not, and most people have never encountered the word gibibyte. The result is that the ambiguity persists in exactly the place it causes most confusion.
Where it matters beyond storage
Network speeds add a second trap on top of this one. Bandwidth is quoted in bits per second, not bytes, and there are eight bits to a byte. A 100 Mbps connection therefore delivers at most about 12.5 MB per second, and the capital B versus lowercase b is the only thing distinguishing them in writing.
Combine both conventions and a "100 megabit" connection downloading a "1 gigabyte" file involves two different unit systems in one sentence. RAM is sold in binary units, storage in decimal, and transfer rates in bits — three conventions in a single machine.
Frequently asked questions
Why does my 1 TB drive show as 931 GB?
The manufacturer uses the decimal definition where 1 TB is a trillion bytes; Windows divides by the binary 1,073,741,824 and labels the result GB. The drive contains exactly what it says.
Is 1 GB 1000 MB or 1024 MB?
Both definitions are in use. Storage manufacturers and SI use 1,000; most operating systems use 1,024 while still writing GB. The IEC name for the binary version is gibibyte.
Why is my download slower than my connection speed?
Connection speed is quoted in bits per second and file sizes in bytes, with eight bits to a byte. A 100 Mbps connection delivers at most about 12.5 MB per second.