Explain why anyone would want to create a veracrypt hidden volume?
I can't think of a reason as to why you'd want to create a hidden volume in VeraCrypt. It says because "you may be asked to hand the information," but why would I need to hand it over? Nobody has any proof of what may or may not be in that volume, so they can't claim that I'm doing something unlawful (assuming I was), because they literally have no proof of absolutely anything. Hence, they cannot make me hand over the password nor can they penalise me for defending my privacy and refusing to hand over my personal files without any proof that those files are somehow harmful (or whatever you wanna call it).
Also, if you have to hand it over, it doesn't make sense that there is 500mb/700mb occupied space when the files there only take 300mb. Where did the other 200mb go?
You have to create a veracrypt hidden volume for two related reasons.
If you are arrested by the government and they suspect that some of the data in the encrypted volume is evidence, you can be forced to provide the password. Since TrueCrypt advertises its ability to create a hidden volume and encourages its use (and that's stating it mildly) the government is right to assume that a hidden volume exists and can force you to provide the key. If no hidden volume exists, the burden of proof rests with you: you have to somehow prove that despite everything you didn't create a hidden volume. So you have to make sure that such a volume exists, so you can provide the password. As a corollary, make sure it's an easy password and fill up the hidden volume so no empty space remains.Non-government attackers similarly will suspect the presence of a hidden volume. Not bound by rules and regulations, they will just beat you until you provide the password, so you better make sure there's a password to provide.