Data compression is the decrease of the number of bits which should be saved or transmitted and the process is rather important in the web hosting field since data filed on hard drives is generally compressed in order to take less space. You will find many different algorithms for compressing data and they provide different effectiveness based on the content. A lot of them remove just the redundant bits, so no data will be lost, while others erase unneeded bits, which leads to worse quality when the data is uncompressed. The process uses a lot of processing time, which means that an internet hosting server should be powerful enough so as to be able to compress and uncompress data immediately. An illustration how binary code can be compressed is by "remembering" that there are five consecutive 1s, for example, rather than storing all five 1s.
