It's kind of odd what that is. Various stuff may show up as "System Data", "Other", or "Used Files" depending on where you're looking at it, such as in Finder or iTunes.
A lot of may be discarded files that haven't been cleaned up yet, like cache and other stuff. Not sure why. The only way I know of to clean that up is to back up to a computer, then reset to factory settings, and finally restore from the backup. It's kind of tedious and it would make sense to double check that one knows any backup encryption password (otherwise it might not be possible to restore from the backup). The backup won't contain any of those files, so restoring from a backup typically gives the user a clean slate on all that junk that builds up.
Back up iPhone - Apple Support
Erase iPhone - Apple Support
Restore your iPhone, iPad, or iPod touch from a backup - Apple Support
It's kind of a drastic measure, but sometimes the only thing that works.