Here's what your online help has to say on the topic:
"
File compression overview
Compressing files, folders, and programs decreases their size and
reduces the amount of space they use on your drives or removable storage
devices. Drive compression decreases the amount of space used by all of
the files and folders stored on that drive.
Windows supports two types of compression: NTFS compression and
compression using the Compressed (zipped) Folders feature.
NTFS compression versus Compressed (zipped) Folders
NTFS compression
a.. If you do not have an NTFS drive, this option is not available. To
determine whether your drive is formatted with NTFS, open My Computer,
right-click a drive, and then click Properties. The file system is
indicated on the General tab.
b.. You can compress individual files and folders using NTFS
compression, as well as entire NTFS drives.
c.. You can compress a folder without compressing its contents.
d.. You can work with NTFS-compressed files without decompressing
them.
e.. You can display NTFS-compressed file and folder names in a
different color to make them easier to identify.
f.. You may notice a decrease in performance when working with
NTFS-compressed files. When you open a compressed file, Windows
automatically decompresses it for you, and when you close the file,
Windows compresses it again. This process may decrease your computer's
performance.
g.. NTFS-compressed files and folders only remain compressed while
they are stored on an NTFS drive.
h.. You cannot encrypt an NTFS-compressed file.
i.. NTFS file encryption is not available on Windows XP Home Edition.
Compressed (zipped) Folders
a.. Files and folders that are compressed using the Compressed
(zipped) Folders feature remain compressed on both FAT and NTFS drives.
b.. You can run some programs directly from these compressed folders
without decompressing them. You can also open files directly from
compressed folders.
c.. Zipped compressed files and folders can be moved to any drive or
folder on your computer, the Internet, or your network, and they are
compatible with other file compression programs.
d.. Folders compressed using this feature are identified by a zipper
icon.
e.. You can protect files in a zipped compressed folder with a
password.
f.. Compressing folders using Compressed (zipped) Folders will not
decrease your computer's performance.
g.. To compress individual files using Compressed (zipped) Folders,
create a compressed folder and then move or copy the files to that
folder.
Notes
a.. To open My Computer, double-click the My Computer icon on the
desktop.
b.. The Compressed (zipped) Folders feature is not available on
Windows XP 64-Bit Edition. "
