This is on WinXP Home so I'm not sure how it would work on other operating systems.
Windows Update creates 5 sub-folders and multiple logging files in:
C:\WINDOWS\SoftwareDistribution
It tends to become cluttered with the downloaded update files.
To clean it out then do the following procedure.
Please click Start, click Run, type in "cmd" (without quotations) and press Enter.
Please run the following commands in the opened window to clean out the folder.
1. Type in "net stop WuAuServ" (without quotations) and press Enter.
You will receive a message stating the Automatic Updates service was stopped successfully.
2. Delete all the folders and files in C:\WINDOWS\softwaredistribution
3. Type in "net start WuAuServ" (without quotations) and press Enter to restart the Automatic Updates service...
This also has an added benefit of fixing Windows Update when it incorectly installs updates.