Reducing texture resolutions to make the asset folders smaller.
For the 686 MB version specifically, this likely refers to a repack of the original, inferior 2007 Sourcenext PC port, not the modern Ultimate HD Edition. You would be sacrificing a massive amount of quality and features for the sake of a smaller file. Download Resident Evil 4 Pc Highly Compressed 686 Mb
: High-quality video files (FMVs) are frequently downscaled or removed entirely to save space. Reducing texture resolutions to make the asset folders
: Textures and sounds may be severely downsampled, resulting in "potato graphics" and distorted audio. Duplicate Removal inferior 2007 Sourcenext PC port