When email is downloaded by Microsoft Outlook (external link) it is stored locally in a special file format with the extension PST, the default location of your PST file varies by which version of Microsoft Windows you have installed.
For Windows 2000/XP (external link) the default location is:
C:\Documents and Settings\<user_id>\Local Settings\Application Data\Microsoft\Outlook
For Windows Vista (external link) the default location is:
This is because Microsoft changed the LOCALAPPDATA location when they created Vista, yours can be found by opening a Command Prompt window (Run > cmd.exe) and then running set.exe, this will display a list of special strings that have been setup for your current login. If you search through them you should find the LOCALAPPDATA string, this is then used to build the default location by adding MicrosoftOutlook onto the end.