Galaxy S2 and space problem

Hi

I'm trying to free some space from my s2 but quite confused.

According to windows and kies i have 3.29 gb free of 7.39 gb for my SD Card and 7.97 free of 11.4gb on my actual phone. Kies is slightly different percentage wise but very close.

The problem however is according to android itself in the storage section my phone only has 239mb of 1.97 gb free. However as well as the phone storage and SD Card there is USB storage that has 8.07gb free of 11.50gb.

What is the USB storage? Basically some apps aren't being installed/updated at the moment because of the lack of space but the USB storage is sitting there practically untouched. I've even transferred all my images and music from my phone to my SD Card to give it more space yet the actual phone space hasn't went down.

Does anyone know what is up here?

Thanks