Internal storage unless you are rooted and using something like apps2sd or running a newer build of Android which allegedly includes the option to store apps on removable storage (MicroSD card in this case).
Otherwise apps go in internal storage. Thankfully the apps are relatively small and I see some that appear to store larger assets (graphics and video) on the removable card. So far I have installed a lot but have yet to run out of space. Still, I look forward to making that 8GB card available as well.
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