What is a Frugal Install?
Frugal/standard is the preferred method for installing any version of Puppy Linux. The system files are stored in a small number of files in one directory, rather than spread out over a full partition. An alternate (and depreciated) installation is known as 'full'.
As the paragraph above suggests, the adjectives 'frugal' and 'full' refer to how a Puppy operating system uses space on a storage partition. A full (depreciated) installation occupies all the space on a partition - hence the word "full". In contrast, a standard/frugal installation can co-exist with another operating system (including Windows or another version of Puppy Linux) on a single partition. Because a standard of installation uses only one directory for the system files it was declared to be 'frugal' - as it is! Later, some imagined the word 'frugal' suggested additional features might be found in a 'full' installation. Quite the opposite - every feature of the 'full' installation is available in a standard/frugal install - and a few extra. "Full" installs are used on systems with minimal resources (and particularly RAM).
In more technical terms a standard/frugal installation uses a layered file system. The base SFS, other SFSs and PupSave files remain compressed in filesystem-in-a-container file. However, to a user, the files in the 'S(quashed)-F(ile)-S(ystem)' appear as the Linux RootFS which normally expanded over a whole directory. Any changes or additional files are added to the PupSave file. Apart from files in the /mnt/ directory which is used to specify mount locations.
This method allows the whole OS to be loaded into memory. Additionally, you can have multiple installations on one partition; this may include the MS Windows OS, as mentioned above.
Also on the Wiki
whiteout file (.wh) - used by layered filesystem to remove read-only file
