Netflix has announced a new feature for mobile which is currently only available for Android called Smart Downloads. How it works is that downloaded episodes that have previously been watched are automatically deleted and replaced with the next episode. This is a means to help manage storage space and a greater effort towards making the mobile experience for Netflix more intuitive and streamlined.
As such, the feature only works while connected on Wi-Fi as to not suck up too much mobile data, but the feature can always be turned off in settings. Although it is only available on Android and tablets, it will most likely arrive on iPhone and iPad at a later date.