Compression Software could be any one of many pieces of software that is used to take multiple files and combine them into one smaller file, often used for file transporation between two loactions. This practice is particularly popular in the mugen community since it allows users to download game content such as characters as one swoft download rather than in multiple files.
There is a variety of software that can compress and extract the files, including many that are free.
Popular compression extensions in mugen include:
Popular compression/extraction software in mugen: