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Compression is a technique that is used to reduce the amount of space required by files on a hard disk volume. Very popular during the late 1980s and early 1990s, compression is rarely used today on new systems. (I am speaking of volume compression here, not file-by-file compression such as ZIP files, which are as popular as ever!) Compression is discussed in detail in this section.
Most people have been told (repeatedly) to avoid compression because it greatly reduces performance. This is true to some extent, but the picture isn't nearly as simple as this blanket statement might suggest. Compression adds overhead to every disk access but reduces the amount data that needs to be retrieved from the platters for a given file. With modern high-speed CPUs, the overhead isn't nearly the issue it once was, while hard disks haven't improved in performance by nearly the same percentage. Therefore, there is a performance tradeoff at work here.
The proliferation of huge, cheap hard disks has made volume disk compression largely irrelevant today. I don't recommend it except for use on older systems that cannot be upgraded to a larger disk for one reason or another. The reason for this is not primarily due to performance effects, but rather because compression complicates disk usage and simply isn't needed in an era where hard disk space costs half a penny per megabyte.