LZMA, or Lempel-Ziv-Markov chain algorithm, is a data compression algorithm known for its high compression ratio and relatively fast decompression speed. It is commonly used in file formats like 7z and xz, making it popular for compressing large files and software distributions. The algorithm works by using a dictionary compression method, which replaces repeated data with shorter references. This allows LZMA to achieve better compression than many other algorithms, such as gzip or bzip2, especially for larger files. Its efficiency makes it a preferred choice in various applications, including software packaging and data archiving.