ANSWERS: 2
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All your information is there, but it's been encrypted to compress the information. For example, if your file has has a line with 25 X's in a row, it will encode that to something like "[25]X" instead of "XXXXXXXXXXXXXXXXXXXXXXXXX", thereby taking up less space. To read the file, you have to know how it was compressed, so that the same algorithm and encoding can be used to reconstruct it to the original form. Of course it's more complicated than that, but that's the general idea.
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