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Compression Level and Performance Considerations
Most advanced compression software will give you some control over how much compression you want to use on the volume, and even let you select certain types of files (based on their extension) not to try to compress. In general, the more you try to compress the volume, the more you can cram onto the disk, but the more advanced compression algorithms can result in performance degradation because they work harder to squeeze the files more so they can compress that little bit more. The degree of degradation depends on several factors, but is especially dependent on the speed of the system you are using. A slower processor can cause compression to result in a serious performance hit, while a faster processor can in some cases make compression improve performance.
Improve performance through compression? How is that possible? Let's consider two copies of an identical 100 MB file; one copy is uncompressed and the other is compressed 2:1 on a volume on the same hard disk. Suppose we need to scan every byte of each of these files. We can read the uncompressed file at a faster rate per byte because we don't have the overhead of decompression. However, we have to read twice as many bytes from the disk, because the file is taking up more space on the disk. The compressed file is using only 50 MB of physical disk sectors, instead of 100 MB.
As you probably know, hard disk access is much slower than the processor, memory, chipset and other system components. For this reason, removing the need to read 50 MB of data from the disk can save more time than the time required for the overhead of decompression! If you have a fast processor that is spending a great deal of time waiting for data from the slow hard disk then you actually get a performance boost with some types of files by using compression.
The essential factor is how fast the system is relative to the hard disk. If the processor is fast and the hard disk slow, you will see this effect. If the processor is slow and the hard disk fast, compression will cause a noticeable slowdown. This is why I don't recommend compression on 486-class machines (unless hard disk space is a severe problem), while I use it myself for two of my partitions on my older Pentium-class machine. I usually notice no slowdown in using these volumes.
There is "middle ground" as well in terms of the compression level. You can usually choose how much compression to use on the volume, ranging from high compression to none at all. Sometimes volumes are used with no compression just to get the benefits of slack reduction that compression can provide.
Finally, there are some types of files that just don't belong on compressed disks. If you have a bunch of large ZIP files, don't put them on a compressed volume, since there is no benefit--they are already compressed and so volume compression will not help them at all. The same thing applies to most multimedia files such as JPEG or GIF images--they have already been compressed internally. Storing these files on compressed volumes will also throw off your free space estimates because they will take up much more space than a compressible file of the same size would.