The world data is stored in vertical columns of 32x32x32 unit Octrees. These are called Stacks (As the Octrees are stacked, one on top of the other).
At the time of writing, stacks are 8 'trees tall, providing 256 units from bottom to top. In world coordinates, they go from -128 to 128.
32x is a compromise - at 16x, it takes less time to generate each stack, but there's more overhead to generate all the stacks that comprise any single players view of the world. At 64x, a single Stack takes up almost the entire viewing area on the development computer (with draw distance being at 100), making generating a 3x3 area of stacks almost, but not quite, overkill.
On the development computer, generating a 256x256x256 octree and filling it with data was completely outside the realm of feasibility.