Don't forget the disk head dimensions / specifications. I used to format 360KB floppies as 1.2MB using a 1. read more
By the size of the media and the density of storage. Really, same answer to limit of any storage device. There are many floppy disk standards from 160KB to 2.88MB (with loose KB/MB definitions). And some much larger in vendor specific formats and loose definition of floppy disk. Usual capacity for 3 1/2 inch disk was 720KB or 1.44 MB. read more
This is one of the reasons that diskettes were limited in storage, together with the head size and the fact that diskettes were subject to the rigors of temperature variation(stretching and compressing) as well as slight variations in floppy drive mechanical alignment. read more