SQL Server backup compression – does what it says on the tin. Instead of SQL Server taking a backup by reading pages / extents of data from the database file and writing them out to the backup file, it compresses the data before it writes. It’s not the best compression you’ll get, as it won’t read the entire file before compressing it; however, it’s good enough that on OLTP databases that contain normal varchar / numeric data you could see savings of over 75% – indeed, I have some databases that save 90% of disk space. And that’s made my storage guys happy. Well, less unhappy.
One side note: if you’re also encrypting backups (available in the product since SQL Server 2014), encryption happens after compression, so you can take advantage of both.