LFS allows Lua code and its associated constant data to be executed directly out of flash-memory; just as the firmware itself is executed. This now enables NodeMCU developers to create Lua applications with up to 256Kb Lua code and read-only constants executing out of flash. All of the RAM is available for read-write data!
A LFS whitepaper was added to the documentation; a very interesting read.
LFS is also supported by the NodeMCU cloud builder and the Docker build image.
Pending PR https://github.com/nodemcu/nodemcu-firmware/pull/2487 will offer a much better Getting Started documentation.