Squeezer is a background file compressor, which uses the new HFS-compression technology in Snow Leopard to transparently compress the folders you configure it to process. Mac OS will read those files normally, they will just take less disk space. How does it work? Just select some folders to compress and Squeezer will silently work in the background to compress the files contained on those folders, regaining disk space. Whenever you use any of those files, Snow Leopard will read it like any other file in the system - it will simply take less space.
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