GVFS stands for Git Virtual File System. GVFS virtualizes the file system beneath your git repo so that git and all tools see a fully hydrated repo, but GVFS only downloads objects as they are needed. GVFS also manages git's sparse-checkout to ensure that git operations like status, checkout, etc can be as quick as possible.
GVFS is still in progress, but it is available here for anyone to try out.
See https://github.com/Microsoft/GVFS for the GVFS client code.