Windows 7: chkdsk....allocation unit

Ran chkdsk on USB Hard disk drive.
what is allocation unit in this disk?

Allocation unit is the size of the blocks on the HD. DO you mean what size is the allocation unit, or something else?

what's the difference between disk space and allocation unit?

DIsk space free is the total the HD has free, allocation units tell you how many units x the number of units for the same figure. Only useful for more complex things.

Blocks, or sectors, on the HD are determined by the HD itself and have traditionally always been 512 bytes.

So-called AF (advanced format) drives are an exception as they have actual 4096-byte sectors, but often still use block addressing based on a 512-byte sector size to be compatible with current OSes.

The allocation unit size as reported by Windows is a filesystem feature and is the same as the cluster size. By default, clusters on an NTFS filesystem are 8 sectors each, or 4096 bytes (4k).

In your case, you're using the exFAT filesystem and a cluster size of 256KB. This is unusually big and will lead to a lot of lost disk space if you're storing many small files on the drive, but it does give a slight performance boost with sequential reading/writing of very large files.