This article is from the CD-Recordable FAQ, by Andy McFadden (email@example.com) with numerous contributions by others.
This is the expected behavior when formatting CD-RW media for use with
Roxio's DirectCD packet-writing software. CD-RW discs are formatted
with fixed-size packets, which takes up more space but allows you to
erase individual files. With variable-size packets, you get to use more
of the space on the disc, but when you delete a file it is simply marked
as gone. The space is still in use.
To use variable-size packets on a CD-RW with DirectCD, format a CD-R with
DirectCD and then do an image copy from the CD-R to the CD-RW.
Packet writing programs from other companies may work differently.
Don't forget that it is only necessary to format a disc if you want
drive-letter access. Conventional pre-mastering and creation of audio CDs
should be done on unformatted discs. See section (3-40).