I didn't realize how to do this until just now so I thought I'd post about it. Suppose you have a directory on your box called "my_files" and you wish to compress it into a zip file. One level above the directory, use the following command
yeah, the whole difference with tar.gz and bzip2 is that bzip2 gives you more compression, so file sizes are small, but bzip2 is a lot more resource intensive when decompressing. So when size is an issue, use bzip2.