Compressed file attribute specifies a file or folder is compressed at NTFS file system level. Compression reduces the actual size of file. Compression and decompression operations are fully transparent which means that user does not have to compress or decompress his files manually. It is done by operating system automatically, so that user operates with compressed files in regular way.
Setting compressed attribute may free up more disk space, however it takes processor time to decompress and compress file when it is opened, modified and closed. Setting compressed attribute on a whole drive might be not the best choice. In order to keep systems performance in appropriate limits, frequently updated, temporary, shared documents, network databases should not be compressed. Also it is rather useless to compress files that are essentially compressed by their data structure (e.g. .JPG, .ZIP, .RAR, .MP3 etc.).