This is XP's NTFS file and folder compression.
You're not restricted to compressing the entire drive (unless that's what you want) - there may be files or folders on the drive you don't want compressed. You can use NTFS compression for individual folders or files. Right click a file or folder, Properties, Advanced, and select Compress contents to save disk space. OK.
The rate of compression is not as good as other software, such as zip, but the advantage is you can open the folder or file as if it were a normal file. The OS will decompress it automatically when you double click it.
If the files or folders are to be archived or do not need to be accessed/edited often, use other software to save more space.
If you need to work on them often, but still need to save space, use NTFS compression for convenience.
You can use a combination of both.
I don't know what formats your backup of DVDs are in. If they are already compressed, then you won't get as much compression as with normal files.