Gzip is a file compression tool that reduces the size of files for easier storage and faster transmission over the internet. It uses the DEFLATE algorithm, which combines the LZ77 algorithm and Huffman coding to efficiently compress data. This makes it particularly useful for web servers, as smaller files load more quickly in web browsers. When a web server sends a file, it can use Gzip to compress the content before transmission. The receiving browser then decompresses the file, allowing users to access the original data without any loss of quality. This process improves website performance and reduces bandwidth usage.