From Google help for administrators:
"How it works
With Drive File Stream, you stream your Drive files directly from the cloud to your Mac or PC, freeing up disk space and network bandwidth. Because Drive files are stored in the cloud, any changes you or your collaborators make are automatically updated everywhere. You’ll always have the latest version.
You can also make Drive files available for offline access. These cached files sync back to the cloud when you're online, so the latest version is available on all your devices."
This uses the word 'stream' to describe how Google Drive files are brought to your computer. It is not clear from the documentation that the entire contents of the files are placed on your hard drive so that you can access them. However, if you look in the cache folder while you are online you will see the whole file being downloaded to your cache folder if you access that file. It would appear from experimentation that the word 'stream' refers to each discrete file being placed in the cache on demand and not to partial files. This is consistent with Google's claim that File Stream allows you to "Stream terabytes of files from the cloud, thereby using hardly any disk space".
You can also choose whether a file is available for offline use and this uses the same cache folder. In Windows the files are stored in
C:\Users\<username>\AppData\Local\Google\DriveFS although they appear to reside in a separate G: drive.
Google provide a syncing/streaming tool to make this happen and it resides in
C:\Program Files\Google\Drive File Stream\<versionnumber>.
If you are interested in the parameters that can be configured by administrators see this Admin help document.