In Disk Utility, by default, if you click the View menu and Show All Devices you will see this on the sidebar:

The top outline entry is the physical Apple SSD. Next you have an APFS Container. Inside the APFS container the volumes share the free space. Macintosh HD volumes is a collection of a read only Macintosh HD (grey) and that is snapshot to APFS, Macintosh HD snapshot. This means that the operating system files are immutable unchangeable. Only Apple can modify those system files. APFS then gives the user a Data volume. Here is where all your data and 3rd party applications reside.
This is why you can Erase all Settings and Content and it does it very quickly. The Data volume encryption keys are discarded making the data unreadable and macOS will then just reset it to factory settings and the Mac is just like you took it out of the box. Works the same way on iPhones & iPads.
You can also create your own APFS volume and install a different version of macOS and you can then dual boot. However, this requires more disk space as it doubles the storage requirements for two operating systems.
APFS uses snapshots along side Time Machine. If you ever activated Time Machine and attached an external disk and ran a backup. Then disconnected the drive quite some time ago. Apple macOS will continue to snapshot changes to disk anticipating the next Time Machine backup. These snapshots are written to the internal APFS file system. When the backup disk is detected and a backup begins then the snapshots are copied over. A snapshot doesn't take any appreciable storage space until you start changing the original files that were snapshot. At that point the differences begin to pile up in the snapshots. Thus needing to backup more and more data. Once you attach the external drive, it will eventually complete the backup and most of the snapshots will clear out.
In Disk Utility, click on the View menu and ensure that Show APFS Snapshots is enabled. Highlight the Data volume and you'll see if there are snapshots listed below. As others have indicated the values being provided regarding free space can be very confusing. APFS makes this rather complicated due to the immutable nature of the file system and how snapshots function.
If you go to System Settings > General > Storage there are more options to help you free up space. Click the little icon to the far right â and you now have options to free up some space. For example, you can see the attachments in Messages and delete them or show in Finder, etc. That is a major improvement over the past behavior.
A couple of other utilities to help find files that are taking up a tremendous amount of disk space. You'll need to grant these tools Full Disk Access in Settings > Privacy & Security so they can see everything. You may be surprised when you run scans with one of these tools. It will show larger files in a larger graph layout. It helps you visually identify files based on size. The first one is free but hasn't been updated in a very long time. The next two are on the App Store but can be procured outside the App Store and GrandPerspective is free if you can find it outside the App Store. If an App exists in the App Store I typically recommend that one over others.
OMNI Group's OMNIDiskSweeper
https://www.omnigroup.com/download/latest/OmniDiskSweeper
GrandPerspective
https://apps.apple.com/us/app/grandperspective/id1111570163
DaisyDisk
https://apps.apple.com/us/app/daisydisk/id411643860?mt=12
If you wish to understand what's going on inside the APFS file system. Here is a blog showing all the APFS related articles that Howard Oakley has written.
https://eclecticlight.co/?s=APFS
Next time you buy a Mac, you need to consider the amount of internal SSD storage you require. You can save considerable funds by using cloud storage, network storage, or external storage. You'll want to consider a backup strategy. While Time Machine is perhaps the simplest no brainer backup solution ever devised. If you desire more control over your backups, consider CCC - Carbon Copy Cloner or SuperDuper.
The way I think about internal storage is the data I need right now. When I am done with working on a project, I'll archive everything off the Mac. I can always retrieve it later but if that data on the internal disk is doing nothing but sitting there. That is wasted space in my opinion. Most corporate business laptops deployed in the millions are shipping with 256GB or 512GB. User data is kept on the network or sync'd with a Cloud service. Most users have only 50-60GB of active data files. Once we eliminated email archives such as PST files users weren't maxing out their internal storage. Don't be a pack rat, discard what you don't need and keep what you do need and ensure it's backed up.