Leaky hit the bullseye, also if I remember, it will have 2 copies of TF2 on your hard drive at the same time. So if you don't have enough room for the update, I think best suggestion is to uninstall it before the update comes, and reinstall TF2 sometime afterwards.
EDIT: Also yes, it should decrease the amount of size of TF2, if I remember, they said it should decrease by 1GB at least. Also I think in one of the updates past few weeks, they said something along the lines of "Deleted GB of duplicated content. Whoops!" For the TF2 Beta update which might have also been in TF2 possibly? Either way funny to me. :P