Coralogix describes its process for creating a free data lake to accommodate a customer's request to migrate approximately 30TB of historical logging data, which was too old for most observability solutions to handle. The solution involved using a Lambda function with a SAM receipt to introduce the data into Coralogix, where it was formatted and structured by a rules engine before being sent to an S3 bucket for long-term storage. The process included standardizing timestamps to ensure the data could be searched based on its original time, and creating index patterns in Coralogix to facilitate efficient data querying. By sending the data to S3, Coralogix saved on storage costs, while allowing the use of tools like Athena for low-latency querying, effectively creating a scalable data lake solution.