RPM = revolutions per minute. More RPM = faster. Generally, faster drives are more power-hungry too, but it depends on the specific drive model as well. According to the specs sheets, my 7200rpm WD scorpio black had lower power draw than my older 5200rpm (or 5400, can't remember) Hitachi drive. I never noticed a difference in the battery life though.
And yes, faster drives tend to be smaller... generally 7200RPM hard drives don't go beyond 320GB or so (I know they exist though, I've come across a few 500GB scorpio blacks), while 500GB and even bigger ~5krpm drives are fairly common.