USB Mass Storage mode has been missing from Google devices like Galaxy Nexus, Nexus 7 etc with Android version newer than 3.0. USB Mass Storage Mode is replaced by MTP (Media Transfer Protocol).
Do you need USB Mass Storage Option in Nexus 7?
Nexus 7 has 2 USB modes to connect to computer. MTP (Media Transfer Protocol), PTP (Picture Transfer Protocol). You can use MTP mode instead of USB Mass Storage mode to transfer photos, videos, music etc.
Windows Vista & Windows 7 natively support MTP mode. If you are using Windows XP, you need to have Windows Media Player 10 or later. Mac OS does not support MTP mode. But you can install android file transfer on Mac OS to enable transferring of data via MTP.
You can transfer files via WiFi between computer & android devices like Nexus 7 or Galaxy S2, S3 etc using android apps like Kies Air, Air Droid etc. You don’t even need to use USB cable if you use WiFi.