A disk compression software utility increases the amount of information that can be stored on a hard disk drive of given size. Unlike a file compression utility which compresses only specified files - and which requires the user designate the files to be compressed - a disk compression utility works automatically and the user doesn't need to be aware of its existence.

When information needs to be stored to the hard disk, the utility will compress the information. When information needs to be read, the utility will decompress the information. A disk compression utility overrides the standard operating system routines. Since all software applications access the hard disk using these routines, they continue to work after disk compression has been installed.

Disk compression utilities were popular especially in the early 1990s, when microcomputer hard disks were still relatively small (20 to 80 megabytes). Hard drives were also rather expensive at the time, costing roughly 1 USD per megabyte. For the users who bought disk compression applications, the software proved to be in the short term a more economic means of acquiring more disk space as opposed to replacing their current drive with a larger one. A good disk compression utility could, on average, double the available space with negligible speed loss. Disk compression fell into disuse by the late 1990s, as advances in hard drive technology and manufacturing led to increased capacities and lower prices.

Note: While the most familiar disk compression utilities were designed to work on DOS systems, the concept was not specific to DOS. The utility DiskDoubler, for example, worked on the Apple Macintosh platform.