I have shrunk a log file of a database in SSMS 2008:
treeview
mydatabase (right-click)
tasks -> shrink -> files : choose log from dropdown
(*) reorganize pages before releasing unused space
shrink file from 6999MB to 417MB
click OK
When I go back in and look, the currently allocated space for the log is 417.38MB, so the reduction seems to have taken place. But I don't see the drive's free space increasing at all. It should have increased by over 6GB. When is the released space put back into the O/S file system?