This refers to how much data is held in memory by the engine at one time. It varies depending on how much of your query can be folded back to the data source. For example, lots of transformations can be folded back to a SQL server for it to process but
with a CSV file, it all has to be done in memory. The only limit when using 64-bit Excel is the memory available on your machine.
I believe that the max dataset size is the max working set size for the Power Query evaluation process. After that you'll start paging.
Data is cached on your machine as you're working to speed up certain operations. 4GB is the limit imposed on the cache. This is not configurable now but it's on our backlog.
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