Compression algorithms are techniques used to reduce the size of data files. They work by identifying and eliminating redundancy within the data, allowing for more efficient storage and faster transmission. Common examples include ZIP for file compression and JPEG for image compression, which help save space without significantly degrading quality. These algorithms can be categorized into two main types: lossless and lossy. Lossless algorithms, like PNG for images, preserve all original data, ensuring that the file can be perfectly reconstructed. In contrast, lossy algorithms, such as MP3 for audio, remove some data to achieve smaller file sizes, which may result in a loss of quality.