Trying to make sapce on my C drive. I see that my Appdata/Local/Packages folder is almost 20GB!
Is it safe to delete this? If not, can it be 'pruned' without affecting installed applications?
AppData folders store per-user information for applications, so if you delete files from an application's applications data directory, it will likely have to recreate that data from default values. In effect the program will forget that you have used it before, configuration choices you may have made, saved files (like game savefiles), etc.
I would recommend you use a tool like windirstat to determine where the space is being used, and what application(s) rely on it. From there you can then begin to determine the impact of your proposed deletion.
See here for some more information related to your query: http://www.pcworld.com/article/2690709/windows/whats-in-the-hidden-windows-appdata-folder-and-how-to-find-it-if-you-need-it.html
As commented, some applications like WSL and apps from the windows store will rely heavily on Application Data storage, to the extent that deleting the files from App Data is akin to uninstalling the application (in a clumbsy, unclean way), so understanding the way a particular app uses Application Data is quite important when determining what you can remove.