From LQWiki
Compression involves encoding information into a smaller representation; "shrinking" the data.
Compression works on the principle that most information contains a high amount of redundancy (e.g. repeated patterns, expected formats, unnecessary or unwanted information) and that a more efficient representation will be smaller. A compression technique can be either "lossy", where some of the information is sacrificed for a smaller file size (e.g. JPEG, MP3 and most video codecs) or "lossless", where the file can be uncompressed back to it's original state.
Linux has a number of general compression utilities available:

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