Adding the doctype declaration means your mark-up is resolved by the browser the way it should (i.e. as HTML5).
Internet Explorer has a couple of issues with local storage. First of all, it doesn't work at all in versions prior to 8 -- you don't specify the version you're running in your post.
Important: you mention you are running on your C: drive: does this mean you are using the file://
protocol rather than http? if so, problem solved. Using the file protocol will cause various issues, not least that localStorage
simply won't work in IE.
If you're still having issues, you may find you need to tinker with the browser's security settings to allow local storage.
This page includes a matrix detailing localStorage support in the various browsers:
http://www.html5rocks.com/en/features/storage
Be sure to check out Mark Pilgrim's excellent HTML5 resource, which includes some IE-specific code for detecting the storage
event: