There is no degradation (zip compression is not lossy, contrary to jpeg for example), but older software cannot open the files. Opening large files is also noticeably slower. I use it for very large scanned files which I store on DVD+R since the space gain is significant.
Michel G. Sylvestre Nikonian from Montréal, Canada
Give it a try. There was a know isuue in an older version of Photoshop (I think 6) that caused a lot of problems, including bloating the file size. There might have been a patch for it, but it's fixed in v7 and presumably "8".