Beginning with the next feature update to Windows 10, currently known as 19H1, Microsoft will introduce a feature called Reserved Storage. The feature will hold space on your PC for temporary files created by apps and services, and it's designed to make Windows updates more seamless. As it stands right now, if you try to install updates but don't have enough storage, you'll get an error.
Now, when it's time to update your PC, the temporary files in your Reserved Storage will be deleted, to make room for the update. Microsoft noted that if that's not enough, Windows 10 will instruct you to expand your storage with a USB drive or free up space.
The amount of storage reserved starts at 7GB, which could be a major issue on devices that have very little storage, like 32GB or 64GB. This will also vary over time based on how you use your PC, and two factors that could affect it are optional features and installed language.
Microsoft debated using a virtual hard disk for this, but it decided on adding support to NTFS. Basically, the servicing stack says how much space is needed, and the visible free space drops by that much.
You can test out Reserved Storage right now if you're running Windows 10 Insider Preview build 18298 or higher.