Automatic memory management means that Stata automatically adjusts its memory usage up and down as necessary based on the data you are using at any given time.
The memory manager is tunable. You can set a maximum memory that Stata is to be allowed to use or a minimum that Stata should not fall below. Or a niceness that tells Stata how soon after Stata realizes it can release memory, it should release the memory. Sometimes memory usage falls just to grow again, so a little delay improves performance. You can be totally nice to other users and release memory the instant it becomes available, or totally selfish and wait 30 minutes, or just go with the default of 1 minute.
Memory for matrices in Stata and Mata is also allocated and freed automatically based on need.
In Stata/MP, the memory manager can even preserve temporary copies of datasets in memory for speed. And all flavors of Stata support frames, which are multiple datasets in memory.
The memory manager has been designed to manage terabytes.
Explore more data management features in Stata.