We are just storing them on a SSD raid, nothing fancy. But yes, the image storage can get relatively big and most Lemmy instances that run on VPS or similar use additional S3 compatible object storage for that. For our instance the space required is currently at about 100GB, although I think we can do some clean-up on that.
The image storage backend Pict-rs can do some image conversion to reduce file-size and you can also limit the maximum file-size people are allowed to upload (here it is 5mb). This makes the growth somewhat manageable.
There are some upcoming changes in Lemmy that will allow proxying images similar to how other Fediverse software does it, but that will increase image storage requirements even further.
In general it is not that hard to run a Lemmy instance, but once it federates quite well the system requirements are maybe a bit higher than what people expect. Running it on a small ARM SBC is definitely not something that will work for long.