Compaction is what happens when something is crushed or compressed. In many places, garbage undergoes compaction after it's collected, so that it takes up less space.
The process of making something more compact, or dense and very tightly packed together, is compaction. Geologists (scientists who study rocks and earth) might talk about the natural process of compaction, when sand or silt becomes denser and denser over time, as heavy material presses down on it. Computer scientists might instead think of data compaction, when data is simplified by removing information that's unnecessary or redundant.