With ClickOnce, you can perform downloads that use HTTP compression, a Web server technology that uses the GZIP algorithm to compress a data stream before sending the stream to the client. The client—in this case, ClickOnce—decompresses the stream before reading the files.
If you are using IIS, you can easily enable HTTP compression. However, when you enable HTTP compression, it is only enabled for certain file types—namely, HTML and text files. To enable compression for assemblies (.dll), XML (.xml), deployment manifests (.application), and application manifests (.manifest), you must add these file types to the list of types for IIS to compress. Until you add the file types to your deployment, only text and HTML files will be compressed.
For detailed instructions for IIS, see the article "How to Specify Additional Document Types for HTTP Compression" in the MSDN Online Knowledge Base (from the Knowledge Base Search page, search for "234497").