Compression depends heavily on what you're compressing.
Image files are usually already compressed, so don't bother trying to compress it further.
Exceptions would be older games where we didn't have the processor power to decompress it in real time.
Such as PSX games.
Compression is pretty complicated, and I honestly don't understand much of it myself.
You could try reading up on it here:
http://en.wikipedia.org/wiki/Data_compression
In any case, compressing isn't a sure fire way to decrease size, since a lot of the data we handle is already compressed.
Most notably pictures, audio and CD/DVD image files.
Smaller games usually have 'dummy' data in the images so it'll fill out the CD/DVD.
This dummy data is usually very easy to compress, since it's mostly just empty space.
But sometimes it's filled with random data, which makes it harder to compress.