Lempel-Ziv-Welch (LZW) is a popular data compression algorithm that reduces the size of files by replacing repeated sequences of data with shorter codes. It works by building a dictionary of sequences as it processes the input data, allowing for efficient encoding and decoding. The algorithm is widely used in various applications, including GIF image compression and PDF file formats. By minimizing the amount of data needed to represent information, LZW helps save storage space and improve transmission speeds over networks.