I search for solutions in this order: Past Code, Unreal Source, Wiki, BUF, groups.yahoo, google, screaming at monitor. – RegularX
Texture compression is built into the Unreal Engine since UT2003. (specific build number here wouldn't hurt.) Compressing the textures shrinks file size, which is very important for BSP rendered using lightmaps, as each BSP surface essentially generates its own texture the size of the surface for its lighting. Some video hardware (we believe) can also run off straight compressed textures without theneed to decompress them first. This allows more textures top be stored in video memory at one time, speeding rendering.