My iRacing folder is 2.3 Gig and the only content I haven't got is the Las Vegas and Watkins Glen tracks.
It works in the way that you sign up on their home page
www.iracing.com, select if you want to try it out for a month which costs $20 - or three months or longer.
The initial install is smaller than my 2.3 Gigs and will contain:
Cars
Pontiac Solstice
Legends
Tracks
Lanier National Speedway
Lime Rock Park
Oxford Plains Speedway
Summit Point Raceway
South Boston Speedway
Lowe's Motor Speedway
Mazda Raceway Laguna Seca
The content is then transferred to your pc via very fast and reliable servers, my downloads from iRacing are the fastest I've seen on my DSL.
So the cars and tracks and all the software resides on your pc but car selection and track selection only works when you're connected to the membership website, which you will be directed to when you buy a subscription.
There is no off-line content, no AI, no off-line "campaign" but you can connect the the membersite anytime you want and run time-trials, testing and practice by yourself.
Extra tracks and extra cars cost from $20 - $25 per item but remember that each track typically has 3 or 4 lay-outs and that once you pay for an item, it gets updated for free, as does the simulation itself for as long as you subscribe.
The amounts and speed of updates are fantastic. So far we've seen major updates at least every three months.