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When you buy a game or application on Steam, the game is added to your Library and shows up inside your Steam account/Client as available for download. -- Authorized to use
At this point, the name "Garrys Mod" would be greyed out until you decided to install it.
The Install process includes downloading mainly, and in your library view it would appear blue with a percentage downloaded/speed.
After it downloads the game or software, tool ETC name will turn white. This means it is ready to use; fully stored on your system inside your steam folder or wherever you chose to store it.
You may easily go inside this folder wherever you have it (Steam > SteamApps default) and delete the game folder there, removing the data from your hard drive. This will obviously clear up space, but steam will think it is installed unless you right click the name inside steam and hit "Delete content"
Deleting content tells steam exactly what the other process did; delete this game's files, and also removes it as a playable entry.
After doing so the game name will again return to grey, still ready for download.
You cannot perpetually remove a purchased title from your library unless you jump through a bunch of hoops with Steam Support Team.
TLDR; "delete game content" does not forever prevent you from enjoying your game. You can easily redownload it to enjoy again.
if the freegame has some DLC, buy it, then it will stay in library.
Savegame progression is either stored in /myDocuments or in cloud (Steam cloud/Uplay Cloud/etc)
Local game content is just the runtime files needed to launch and play the game. Saves and progression are stored in a totally different place. If you need to know where it saves stuff for a certain game, just do a quick google search and you see how it's storing your personal preferences/saves.