It stores more files in less space by storing those files more efficiently. When the file is loaded into memory, DriveSpace uncompresses the file so that it returns to its original size, just as a sponge does when you let go of it. You should use DriveSpace if you are running low on disk space and don't want to invest in a larger hard disk drive. DriveSpace can dramatically increase your available disk space. However, because DriveSpace uses at least 33K of memory, it makes sense not to install DriveSpace unless you need it.
Most files contain a lot of repeated data.
When DriveSpace finds repeated data in a file, it retains the first occurrence of that data, and replaces any other occurrences of that data with a cross-reference to the first occurrence. The cross-reference takes less space than the original data. Some files contain more repeated data than others. Bitmap files and text files typically compress well, since most such files contain a lot of repeated data. If you have a computer with a fast CPU and a fast hard disk, you probably won't notice much difference in system speed after installing DriveSpace.