Buying this does not void the warrenty. It's an official MS sanctioned product and doesn't require you to open the console to install.
It comes with a data transfer cable that takes all the data from your 20GB hard drive and places it on the 120GB, formatting the 20GB afterwards. The process is one way and irreversable.
You'l also notice you won't get 120GB in total, due to the way the data is calculated. You'll receive 111.76GB from the actual disk, of which about 3.5 GB will be taken up with system files, so don't be surprised when you have about 107GB available space once you've bought it.
This drive is official, so it works as well as the original 20GB one. If you plan to make use of the video market place, or if you want to use the ability to install games onto your hard drive (coming this autumn) so that games can potentially run faster, then this is a good purchase. And at £75, Play.com are the cheapest retailer I've seen selling this brand new. A real bargain.