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My Azure account contains a "storage account" and a "disk". The disk is "managed" by the virtual machine in my Azure account. It is described in Azure as "Standard HDD Managed Disks" and "S10 Disks".

If my VM is managing the disk, does that mean it is managed by Azure or by me? The disk is 127 gig. How do I find out how much of that I'm actually using? Can I resize downward? Azure says I'd have to "deallocate" my VM. Does that mean wiping out the VM and starting over?

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Yes, you can resize your disk by finding the disk in the portal and navigating to the "size and performance" blade. Deallocating just means turning the VM off. It's what you do when you click "Stop" on the VM overview blade.

When you finish resizing you can click "Start" to reallocate the VM.