Vanilla AA2 does not use any compression. One could reduce the install size by using NTFS compression, which helps a lot with this game.
AA2Mini/AA2Unlimited uses ZStandard for most files, except for sound files where it uses Opus, and BGMs where it uses Ogg Vorbis.
You can find modding instructions in the
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. If you want to use an old PP or Wizzard mod, however, you will have to convert it to PP2 format using the scripts found in the extra folder of AA2Mini.