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By default JCR Values are stored in the Workspace Data container along with the JCR structure (for example: Nodes and Properties). JCR offers an additional option of storing JCR Values separately from Workspace Data container, which can be extremely helpful to keep Binary Large Objects (BLOBs) for instance.
Value storage configuration is a part of Repository configuration. See more details here.
Tree-based storage is recommended for most of cases. Simple 'flat' storage is good in speed of creation/deletion of values, it might be a compromise for a small storage.