Running out of HD memory on my Macbook Air late 2022.

About "System Data", Apple's Help says

• System Data: Contains files that don’t fall into the categories listed here. This category primarily includes files and data used by the system, such as log files, caches, VM files, and other runtime system resources. Also included are temporary files, fonts, app support files, and plug-ins. You can’t manage the contents of this category. The contents are managed by macOS, and the category varies in size depending on the current state of your Mac. You can manage your data that falls outside the other categories using the Finder or the third-party apps that created it.

Here's something that you might want to try. Start up your MacBook Air in Safe Mode. (Follow the directions for Apple Silicon Macs.). Then restart the Mac again to get back to regular operation.

Start up your Mac in safe mode - Apple Support

Use safe mode on your Mac - Apple Support

One of the things that Safe Mode does is that "it clears some system caches, including font caches and the kernel cache. These are automatically created again as needed." These caches may be part of that big chunk of System Data. macOS presumably has a much better idea than any third-party "cleaner" app as to which caches are safe and desirable to remove. (Some "cleaner" applications might do more harm than good.). I'd give it a chance to do so.

Obviously System Data shouldn’t be taking up that much space and that it has gotten that large isn’t a good thing, and wasting drive space is just one of the not so good things about it. Servant of Cats’ suggestion to restart in Safe Mode is spot on because it cleans up system cache files etc. If it doesn’t clear things up my best advice would be to back up your computer using TimeMachine and then restore the computer to factory settings and restore from the backup.

What to do before you sell, give away, trade in, or recycle your Mac - Apple Support

The above link to an Apple Support page details how to erase the hard drive and reinstall the operating system.

I should have realized that "System Data" referred to the "System Data" category, and wasn't just a generic term.

I don't think you can (or should) manage it directly, but sometimes you can try to figure out what is going on, and maybe to give the system a nudge in the hope that it will then clean up after itself.

What do you see if you go into Settings > (your name) > iCloud? I'm not interested in a screen shot that includes your Apple ID (please don't post that!) – just in the section that looks like this:

I doubt if it's going to turn up any "smoking guns" about you having so much data in iCloud Photos or iCloud Drive that synchronization keeps your Mac's local drive full to the brim. Especially since that Storage report already has categories for iCloud Drive and Photos – and the total of the numbers for those two categories is less than 1 GB.

If you are using Time Machine for backups, have you connected your Time Machine backup drive from time to time? I think what happens if you don't connect the drive is that Time Machine saves up snapshots on the internal drive – in preparation for updating the backup drive when it sees that drive again.

This probably doesn't explain all of what you're seeing, but might explain some of it.

If you are not doing Time Machine backups, be sure to do some other form of backups – e.g., to an external drive with Carbon Copy Cloner or SuperDuper!, or using a cloud backup service like Backblaze. If something happens like a hardware failure, or your laptop being stolen, or burning up in a fire, and there's no backup, it will be too late.

Do you have a lot of photos, videos, movies, or TV shows? Those can chew up a lot of space – especially any form of video. (A Digital Copy of a feature-length film may range from 1.2 GB to several GB in size. That's with a great deal of compression having been applied to get it that small.)

Could you check how much space your home directory is using?

Open a Finder window, then look in the sidebar (below favorites) for the entry with your user account name and a little icon of a house.

Select it, then right-click on it and select "Get Info" from the pop-up menu. Wait for it to calculate the total. This may tell us whether the space-consuming files are in your user account area – or if the number is small, it may tell us that they must be in some system area.