Windows NT/2000/XP/2003 supports compression on individual files, folders, and entire NTFS volumes. Files compressed on an NTFS volume can be read and written by any Windows-based application without first being decompressed by another program.

NTFS compression is available on volumes that use the NTFS file system, and NTFS compression has the following features and limitations:

• You can use NTFS compression to compress individual files and folders, as well as an entire NTFS volume.
• You can compress a folder without compressing its contents.
• You can work with NTFS-compressed files without decompressing them, because they are decompressed and recompressed without user intervention.
• You can display NTFS-compressed file and folder names in a different color to make them easier to identify.
• You may notice a decrease in performance when you work 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 performance.
• NTFS-compressed files and folders only remain compressed while they are stored on an NTFS Volume.
• You cannot encrypt an NTFS compressed file.

More information, please see: How To Use File Compression in Windows XP

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