When the Android emulator says "not enough space to create userdata partition"

Today I helped a student who was trying to set up the Android emulator but received the message "emulator: ERROR: not enough space to create userdata partition." At first they suspected the specified virtual storage device was too small and tried increasing it, but that just made the "required" number in the error message bigger. This message is actually saying that there is not enough free space on the actual hard drive to reserve for the virtual storage device. Freeing up some disk space allowed creating the emulator.