For anyone else visiting this in the future, clearing the packages removes older versions of add-ons.
If your device was first set up with an add-on called ABC, and it was already at v1.12 , then, as each time Kodi updates it keeps the previous version of the add-on. So you would end up with
ABC v1.12
ABC v1.13
ABC v1.14
ABC v1.15
all stored on your device, despite only using ABC v1.15 . Keeping the older versions can be useful (let's say v1.15 had an error in the code, you could then revert to v1.14 temporarily). That said, if you're unlikely to ever rollback to a previous version of an add-on, and you don't have gigabytes of space free, it makes sense to prune the older versions.