1MB is larger than 1KB. It's similar to the metric system in that Killo is less than Mega which is less than Giga... etc.
Each successive prefix is multiplied by 1024 (2^10) rather than the 1000 (10^3) used by the SI prefix system (also called scientific notation used in the metric system). Thus:
kilo (k/K) = 1,024
mega (M) = 1,048,576
giga (G) = 1,073,741,824
tera (T) = 1,099,511,627,776
peta (P) = 1,125,899,906,842,624
exa (E) = 1,152,921,504,606,846,976
zetta (Z) = 1,180,591,620,717,411,303,424
yotta (Y) = 1,208,925,819,614,629,174,706,176
Note: Hard drive manufactures traditionally have used the prefixes to mean the same thing they mean in the metric system (i.e. 1000bytes as 1K, 1000000 = 1M, etc.) However it still holds that 1M is bigger than 1K.