What is the purpose of @SmallTest, @MediumTest, and @LargeTest annotations in Android?

This blog post explains it best. Basically, it is the following:

1. Small: this test doesn't interact with any file system or network.
2. Medium: Accesses file systems on box which is running tests.
3. Large: Accesses external file systems, networks, etc.

See this page (search for "@SmallTest") on how to specify which tests get run.