Minecraft uses a mathematical formula to create a world. The world you get us based on a number that Minecraft calls the “seed” number. From that number it creates all the terrain, water, trees, caves and so on. If you use the same seed you get the same world every time.
Because of this it knows what, say, chunk 50,40 looks like before you visit it. So no need to save it until after you visit.
Thus only the parts you’ve seen are saved, which is why you can have such a huge possible world without taking up all the disk space.
One thing that used to happen is any time they changed how world generation works there would be a sudden jump between areas you had already visited and new areas where the different parts of the world no longer generated the same and the terrain wouldn’t fit together.
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