Macbook Air: How does one handle 128 GB storage space?

I am considering buying a Macbook Air, and I think that the base model is more than enough for my needs. I mostly plan to use it for programming and maybe some photo editing, YouTube for video and that's about it. The only detail that I am unsure of is the 128 GB storage space, so these are my questions:

1) Are those 128 GB all available for the user, or is it partially used by OSX?

And more importantly:

2) How does one manage to work with 128 GB of storage? Tell me what your experience has been while using this amount of storage space. (I am planning on using an external HDD anyway, but I'm curious what you guys have to say)

Thanks for your answers!