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Basically, it's software that will find a specified game folder, locate all the audio/video/and image files and shrink them. By shrink, I do not mean zip.
The software would take say a jpg and extract some of the pixels, thus shrinking the file. Take away some noise in an mp3/wav file, and it also shrinks.
I have been doing this very tedious task manually for some time now in order to make graphically intensive games run faster. It DOES work.