It used a 256MB magneto-optical drive. The idea was that you could have your entire operating environment in a cartridge that would fit in a jacket pocket. Sit down to a NeXT Cube at a remote location, insert your M/O drive, and it would be as though you were back at your personal workstation.
At one time (back when CD-ROMs were about five bucks apiece) I thought that Fujitsu's 650MB M/O disks (about the size of a Sony floppy, but twice as thick) were the bee's knees. I've still got about twenty of them in their original cellophane, and two external drives—SCSI, alas!—here at the Harrison Street Museum of Senescent Technology.
cordially,