Notes compresses all files except .zip files.
The compression option allows you switch this off for individual files.
Switching off compression used to give a small speed advantage, but with more modern machines
the difference is negligible.
The compression option should be also disabled for pdf files when the database is using a raw text full text search. Most databases use the raw text search as it is faster and the default, so compression should be disabled for pdf files.
The option cannot be hidden.
Using Lotusscript a file cannot have compression turned off. Apparently this can be done in Lotus Notes 6.
To find out if a file has been compressed, look at the $FILE field on the document and look for the Compression Type property.
The compression type is usually Huffman 1 or none.