Data compression is a technique used to reduce the size of data files, making them easier to store and transmit. By eliminating redundant information, compression algorithms can significantly decrease the amount of space required for data, which is especially useful in contexts like internet and cloud storage. There are two main types of data compression: lossy and lossless. Lossy compression reduces file size by permanently eliminating some data, which can affect quality, while lossless compression retains all original data, allowing for perfect reconstruction. This balance between size and quality is crucial in applications like image and audio processing.