Hi Myron,
You can manage the level of logging in CRM by going to Administration>>System>>Logging. Here you can set the level of CRM logging. For most of our installs, we set the System Logging Level to 0 and SQL Logging Level to 'All queries over the Threshold' This keeps the CRM program created logs fairly small. If there is an issue, we crank up the log level for the period of time we are investigating then set it back low again after the issue is resolved.
On the SQL Logging side you'll want to pay attention to the Recovery Model you have assigned to the CRM database. You can see this setting by logging into the sql management studio, then expand the databases item. Find your CRM database and right click it then select properties. On the left side of the screen click on the Files item. Here you will see the database and log file information - as far as the location they are at on the server and the autogrowth settings. We usually set the autogrowth to a percentage instead of the by 1mb default setting. Depending on the anticipated DB size we go with either 5 or 10%. Also pay attention to the maximum size - this is in part determined by the method you are using to backup the db(full or simple) but wrong settings here can cause HUGE log (*.ldf) files on the server. Too small and you'll get errors in the application. Generally if we are using a Full backup method, I set the max size of the log file to about 25% of the db or 500mb whichever is larger. If you have a lot of users/activity this may need to be larger of course, but on a 3-5 user install this ~seems~ to be an ok rule of thumb. Next select the Options item on the left side of the Properties screen. What is the recovery model you have the db set to? (simple or full?) Depending on how you are managing your SQL backups (are you running something like backupexec and have integrated a sql backup into the nightly plan there? or are you doing backups via a backup job in sql management studio?) has some bearing on which option to choose. We generally choose full and make sure sql is running a backup each night to truncate the logs for us.
Here is a link to Msoft with all kinds of info on the three types of recovery methods and how they affect backup/restoring:
https://technet.microsoft.com/en-us/library/ms345583(v=sql.105).aspx
Some sites rely on us to manage the backups of the SQL data for CRM and place the *.BAK file somewhere that their nightly backup can pick it up. At those locations, we have a few scripts and a scheduled batch file that runs the backup in sql, manages the CRM log files (ie removes log files over 8 days old), removes sql *.bak files over 8 days old etc.
If you have a site where the settings weren't quite right to begin with and now you have large log files, there are ways to get them back down to size. Here is a link for truncating on Msoft's website:
https://technet.microsoft.com/en-us/library/ms189085(v=sql.105).aspx
One way this can be done on smaller install sites is to backup the DB, then detach the DB. Rename the LDF file, reattach the DB and remove the Log file from the re-attach screen. This will restore the DB with a blank log file. Then you can delete the old .LDF file. Disclamer Note that this is the quick & dirty way to shrink the log file for small installs where you are sure you have a good backup. There are better ways using TRUNCATE commands etc. Regarding the CRM program created log files, you can manually delete these. They are located in your CRM program install location in the LOGs folder. keep the last weeks worth and delete the rest. (they'll have a name starting with the yyyymmdd followed by core, crm, crmsearchindex,ewaresql,ewaresystem,hibernate,mailchimp,scrm,sdata,social,spring,sql). If you are nervous, you can cut anything older than 10 days ago and paste into an archive folder for a day or two then delete them.
As a final note if you want initiate a one-time backup in sql (without setting up a job) you just right click on the DB you want to backup. Select the TASKS menu item then choose Backup. Select the Backup Up to: DISK and use the ADD button to select the location where you want the backup to be placed. You can do this when users are in the system, but if possible have users out first. This method is useful for Quick backups but don't rely on it for normal nightly backups etc.
In summary how much space cRM requires depends on the number of users and the users (and escalation) activity. For most of our installs 30 GB would be plenty. A small 5 user install should take under 5gb if the logs are managed.