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In this video tutorial, the process of compressing large files to a smaller size using WinRAR software is demonstrated. Compressing file size has advantages such as easier uploading and quicker data transfer. The steps to compressing a file involve selecting the folder, right-clicking, and clicking 'Add to Archive'. By following the settings on screen, the file size can be significantly reduced, as demonstrated with a file size going from 415 MB to 220 MB. WinRAR is recommended as the best compression software for this purpose.