Elyria's inventory system runs via a system encompassing a volume based system, essentially if it can physically fit into the storage container without leaking out (in case of a liquid) it will be stored.
On person; Edit
All items stored on your person, that isn't hidden or within another container, will be visible to the outside world.
A craftsman can create equipment (boots, pouches, belts, backpacks to name a few) which can be used to store more items on your person or to add more storage capacity to currently crafted equipment.
In the world Edit
Furniture may be crafted which can be used to store items in (Chests, boxes, shelves, armour and weapon racks etc..) Elyria that would otherwise not fit on your person.