Oddly enough the Cartoon from 89' was the only real attempt to explain how Link manages to carry the items at the same time. He had a magic pouch that shrank everything that was placed into it. They would regain their normal shape a few seconds after it was taken out. Nothing like this was ever revealed or mentioned in the games as far as items go. However there is a sort of magical explanation for his wallet, and ability to carry bombs or arrows.
In ALTTP the very same great fairy that would upgrade Link's Boomerang, sword, and shield, could also increase his ability to carry more bombs and arrows.
"Then I will increase your carrying ability so you can carry 70 Arrows at maximum. This is just a small happiness I can give to you." — Venus
In WW the great fairies increased Link's wallet, bombs and arrows. They did the same in MC, the great fairies have the ability to increase what a person can carry. In the time of ALTTP through donation in the pond of wishing. If these have almost become common among all heroes then there might be some other magical means of carrying other things than just money arrows and bombs. In the original demo of SS we see Link pulling various things out of his pocket such as potions or other weapons. Each item being something a little greater than what a pocket can carry. There might just be some form of magic placed on the more mundane items in Hyrule like pouches and wallets that allows for people for people to carry more than they would have before. This could be a bit of what makes Hyrule a more magical place and the Hylians a very magic using people, since they have been described as this for many years now.
If other forms of clothing can do things like allow for someone to walk around within the crater of an active volcano with no ill effects whatsoever, easily be capable of swimming and breathing water indefinitely, or a magical armor that deflected all attacks and was powered by rupees, then I do not see why a pouch or pocket could be made to hold several large items magically. The blue and red tunics were rather typical items sold in shops in the time of OoT already, they were not truly wondrous relics but basic needs items sold in general stores and were fairly affordable to the struggling adventurer. After this a pocket that holds a megaton hammer might just be a very typical item carried by most Hylians for it's amazing utility.
