a fully working Linux system (any version should be OK);
the common gzip compression utility, or alternatively bzip2
that you find on
ftp://sunsite.unc.edu:/pub/Linux/utils/compress;
this tool compresses better than gzip, but it's also a wee bit slower
and consumes a lot of memory;
There are other executable compressors. One is gzexe (forget it), while
tcx was probably the best before upx became available; yet another
is tzx, in theory better than tcx. The thing is, it screwed
everything up when I tried it on a spare PC, though I'm not sure if I did
something wrong. You had better stick with upx: it's reliable,
efficient, and very handy.
There are kernel patches that provide transparent file system compression a
la Stacker, but as of this writing none of them has yet a reputation for
stability and reliability. For safety's sake, steer clear.