Found on Excel Oddities
The 256-column limitation
Every Excel worksheet is limited to 256 columns. Despite what must amount to thousands of requests over the years, Microsoft refuses to increase the number of columns in a worksheet. Beginners often discover this limitation when they want to set up a spreadsheet that contains data for each day in a year. If they store the data horizontally, they run out of column in mid-September.
So we're stuck with 256. Why such a weird number? Why not 250? Or 365? The number of rows and columns is a by-product of the binary number system. 256 is 2, raised to the eight power (2^8), which is the maximum value that can be stored using eight bits. The number of rows in a worksheet is 65,536, which is 2^16. Older versions of excel contained only 16,384 rows, which is 2^14 power.
The reason for the 256-column limitation is probably due to the fact that Excel is so old, and it contains lots of code that would be "broken" if the number of columns were increased.
Following are a few related facts:
Corel's Quattro Pro spreadsheet supports 18,278 columns and up to 1,000,000 rows.
The spreadsheet in Microsoft's Office Web Components supports 18,278 columns and 262,144 rows