The deflation algorithm used by gzip, zip and zlib is a variation of LZ77. It finds duplicated strings in the input data. The second occurrence of a string is replaced by a pointer to the previous string, in the form of a pair (distance, length). Distances are limited to 32K bytes, and lengths are limited to 258 bytes. When a string does not occur anywhere in the previous 32K bytes, it is emitted as a sequence of literal bytes.
Literals or match lengths are compressed with one Huffman tree, and match distances are compressed with another tree. The trees are stored in a compact form at the start of each block. The blocks can have any size (except that the compressed data for one block must fit in available memory). A block is terminated when deflate() determines that it would be useful to start another block with fresh trees. (This is somewhat similar to the behavior of LZW-based _compress_.)
Duplicated strings are found using a hash table. All input strings of length 3 are inserted in the hash table. A hash index is computed for the next 3 bytes. If the hash chain for this index is not empty, all
strings in the chain are compared with the current input string, and the longest match is selected.
Source: Jean-Loup Gailly (MIT) and Mark Adler (Caltech).