KVM storage volumes are virtual disk images that can be assigned to virtual machines. They are stored on the host system and presented to the guest as virtual hard drives. The most commonly used image format for KVM storage volumes is qcow2 (QEMU Copy-On-Write 2). qcow2 is a sparse format that only allocates disk space as needed, allowing multiple volumes to efficiently share the same base image using copy-on-write. This saves disk space compared to raw disk images. qcow2 also supports features like snapshots, encryption, and compression.