Compression refers to the process of reducing the size of data to save space or speed up transmission. There are two main types: lossy and lossless. Lossy compression reduces file size by permanently eliminating some data, which can affect quality. Common examples include JPEG images and MP3 audio files. In contrast, lossless compression retains all original data, allowing for perfect reconstruction of the original file. This type is essential for applications where quality is critical, such as PNG images and ZIP files. Both methods are widely used in various fields, including digital media and data storage.