LZ or LZIP is an archive file that uses LZMA algorithm while compressing. LZ files can be created from several UNIX based tools like GZIP and BZIP2. It can compress multiple files and produce a multivolume archives. It can check the integrity of the file using a checksum.
RAR is an archive file format that can compress data files similar to ZIP. It can be created with WinRAR software. But it is not an open source archive file. Using Huffman encoding RAR file uses lossless file compression technique to compress large amount of files.
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