7-Zip is a file archiving application. Remember WinZIP or PKZIP? Think of 7-Zip like that.
This app is not pretty but it sure is easy. In fact, it’s so easy that it sometimes confuses people. When you install it, all you have to do to create a ZIP or 7z file is just right-click a file, a selection of files or a folder, choose 7-Zip from the context menu and create your ZIP file. That’s all there is to it.
7-Zip will easily open files created by other archive programs such as WinZIP. It will also recognize archive types from Linux such as TAR and GZIP (very handy).
The only archive type others use that 7-Zip does not support (to the best of my knowledge) is RAR. WinRAR is available for that (but it’s not free).

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7zip has been my choice of compression software for yrs. It always gets the job done with ease while at the same time being very resource friendly. As for supporting the RAR format. 7zip does support the RAR format. You can view the compression formats here: http://tek-media.net/images/misc/7zip.jpg
UPDATE: I apologize for my last post. It seems I miss read your comment regarding the RAR archive format. With 7zip you can extract a RAR archive only. As you mentioned above to create the RAR format you will need WinRAR.
7-Zip’s latest version 4.57 will unpack RAR archives and the 7-zip 4.58 beta can unpack multivolume RAR archives and in the beta you can also unpack .lzma archives. The beta also has some speed optimization.
I don’t know if anyone has heard of it but IzArc, I find, is a very good archiving software. It opens a lot more file types than 7-zip or any other out there. Of course, I still use 7-zip because of it’s tiny size but I also have IzArc installed in case 7-zip doesn’t want to open something. Oh and of course people out there that use udf and daa, i hate you. I don’t want to pay for PowerISO. anyone knows a free alternative?? thanks.
oops sorry, in the middle of the rant i realized i wrote udf instead of uif. so please replace them in your mind. uif is a magic iso file extension but PowerIso opens it now. proprietary file extensions are so annoying but i guess that’s how we find the standards, out of a bunch of proprietary ones.