As far as the size of your restore folder goes it depends on the size of your hard drive and how much empty space there is on it. If you have 100 - 200GB of empty space then the size of your restore folder is not important. Windows needs approximately 15% of empty space on the C:\ drive to work properly so it is only if the total of occupied space is getting towards 85% of capacity that you need to think about freeing up hard drive space.
One way to do this is to reduce the amount of space allocated to the restore folder. Another, and perhaps better, way is to move stuff you want to keep but don't need regular access to to external storage or a second hard drive.
When do restore points get created ? At various times. Installing critical updates usually creates a restore point as does updating important software such as A/V. And you can of course always create one yourself if you are planning on making some major change to your system which you feel might go pear shaped! It is a very simple way of getting yourself out of trouble.