An inventory is where items are placed when they are possessed by someone or something. A chest's inventory might contain treasure like gold pieces or items.
All characters have an inventory as well but they also have a special section for the equipment they are currently wearing (e.g. armor, boots, shields) or holding (e.g. weapons).
Unlike NWN, the icons of inventory items will be arranged in a new system similar to inventory systems of current MMORPGs. All the inventory icons will be smaller overall (64x64 pixels), and each will have a seperate slot.
Based on a screenshot revealed in July 2006, it appears a PC's inventory will include 128 inventory slots.