Data compression improves network efficiency by reducing the size of files transmitted over the network. This reduction leads to faster data transfer and lower bandwidth usage, which is essential for optimizing network performance. Compression techniques can be lossless, preserving the original quality of data, or lossy, sacrificing some quality for greater size reduction. By minimizing the amount of data transferred, organizations can also save on costs associated with bandwidth and storage. Ultimately, effective data compression enhances the user experience by decreasing loading times and ensuring smoother data delivery.