Apparently if you update through itunes it requires less space. The space for the upgrade is one thing, but the additional 700 mb+ used after the update is much worse. The iphone 8gb had 6gb free under iOS 7. Under iOS 8 that goes down nearly to 5. And to make matters even worse, the apps will double in size due to the use of 3x images. I don't understand why apple is still selling 8gb devices, because the user experience on those is going to be horrible.

iOS did have a sizable requirement, although I forget how much space was required to do the install. I had many friends who had difficulty upgrading due to it.