What does macOS consider "enough space"?

In iCloud preferences, there's an option called "Optimize Mac Storage" which says, "The full contents of iCloud Drive will be stored on this Mac if there's enough space."

Just what does "enough space" mean? At what point will the Mac start offloading things to iCloud?

It's based on the available storage space of your device. iCloud is a syncing system which means it allows you access to your files from all devices signed-in with the same Apple ID. When you change a file on your Mac, your iPhone will show you that changed file (after the change syncs, of course). You're not changing a copy of a file, you're changing the actual file. So files are kept on your computer and are stored in Apple's Cloud.

This is different than a system like Dropbox in that Dropbox keeps a copy of a file online. You can have a 64GB iPhone and 1TB in Dropbox space, there's no correlation between the two.

Taking a sidetrack to understand iCloud better, a good explanation is provided by The Mac Observer:

iCloud syncs your data between your Apple devices. If you delete a file in iCloud on one device, it gets deleted on all your other devices. But that means if one device is infected with malware, and your files get messed up, they will be messed up on every iCloud-enabled Apple device.

iCloud Backup is a good start but it’s not a true backup either. This service does back up many things on your device, but it doesn’t back up data that is already in iCloud. Services like Contacts, calendars, Safari bookmarks, Apple Notes, and Messages in iCloud are not included in iCloud Backup. A true backup would back up everything.

So when you ask "At what point will the Mac start offloading things to iCloud?", the answer is that it always offloads some things to iCloud. You can fine-tune your storage needs vs speed in accessing files.

On your Mac when you select "Optimize Storage", it will move things like movies and TV shows that you've already watched from local iTunes storage to iCloud (freeing up some of your drive space). You also have options to store other items, like email attachments, in iCloud.

Just what does "enough space" mean? At what point will the Mac start offloading things to iCloud?

"Enough space" means the space on your local drive is equal to or greater than the the cumulative size of the files stored in iCloud. So, if you have 10GB free on your Mac and only 5GB stored in the cloud, iCloud will synchronize all 5GB to your Mac because there is "enough space."

Your Mac will offload files to iCloud based on usage not some arbitrary number of GB free/used. If you have sufficient space on your local drive, it may not offload any at all. Sufficient space is not a fixed number - it varies from person to person. You may have several gigabytes of storage space free, but you cannot download the next macOS update because it exceeds your available free space - in this case, you won't have sufficient space.

In this Apple support document there is a section entitled Store your files in iCloud and save space on your device

Offloading Files

If you need more space on your device, iCloud Drive can help.... your Mac keeps all of your recent files on your computer, but keeps your older ones only in iCloud, ready for you to download when you need them again.

^{Emphasis mine}

It will go by how recently you accessed the file, not by how large it is. So if it can't keep things in sync because your requirements locally are larger than what you have available, it will offload the oldest files first and keep offloading until it frees up enough to continue working. What's that number? It depends on what you're doing and what you need.

You must keep in mind that iCloud can only try to help optimize space, not that it will be completely successful. If your requirements for storage both locally and in the cloud are simply too great, you need to buy more storage. Period.

Local vs Cloud Storage

It's also important to note that iCloud isn't an extension of your local storage. For example, if you have a 128GB drive on your Mac, and 1TB in the cloud, you don't have 1.13TB total. iCloud is ultimately a sync service. If you're running out of space, you need to add more whether it's a USB flash drive or you upgrade your SSD (if possible) or buy a new machine.

This is why it's important to purchase a machine with the storage, RAM and CPU you will need tomorrow, not what you need today. In other words, if you think 128GB is good enough, you probably need 250GB.