Open Settings scroll to Storage. Choose either Internal storage or SD card (this will show what is taking up space). Remember, the android system might take up around 2-3GB of space.
If you install a terminal app (Terminal Emulator for Android works well) and run df (just type the letters d and f and Enter), you'll see the partitioning of the storage in the phone. Only emulated storage is available for your use. So if you have a 16GB phone, and emulated storage is 2GB, that's all you have available - 2GB.
(Android storage is partitioned into a number of partitions, all but 2 of them for Android itself. One is for recovery and the other is for user data [including apps].)