MP3, definitely; that's a great pick. But do you really think using a hard drive instead of flash memory was a huge innovative leap? They didn't invent the hard drive. Both forms of storage existed at the time, and anyone could have picked one over the other.

The iPod hit the market pretty much together with 1.8" HDDs which proved to be a pretty nice sweet spot for a while. Flash costs became pretty unattractive in comparison for desirable capacities while larger drives led to clunky devices.

Not sure how one counts innovative but Apple chose a good horse to ride for storage that led to it being in an increasingly enviable position among MP3 players. (Which Apple parlayed into popular flash players and then the iPhone.)

Yes. In my opinion the 1.8" HDDs are the main technological feature that made the iPod possible.

To me, this was the most amazing thing about the iPod. 5GB inside this tiny package... it seemed impossible before I learned about those tiny hard drives.

As I understand it, of of Apple's big competitive advantages was that they contracted for essentially the entire output of 1.8 inch hard drives so no-one else could use them.

Yes, but only after they had a large volume of iPod sales, I think. Apple has also used their scale with iPhone to buy components in such large volumes none of their competitors can get a lower price, which means Apple can actually be price competitive when they perceive it in their interest to do so.