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To reduce the file size of a 26 MB file, images can be compressed in two ways. The first method involves selecting a picture, going to the picture format tab, and choosing to compress pictures at high fidelity. Additionally, cropped areas of pictures can be deleted to further decrease the file size. The second method is to click on file, compress pictures, and select the option to compress all pictures in the file. After applying these changes, the file size will decrease, although saving the changes is necessary for the reduction to take effect.