I might just have found such an application, and its name is KGB Archiver. It's the best zipping / archiving software I have found ( much better than Winzip and Winrar )
When reading about the minimal requirements for this program, I was a little surprised: 256 Mb RAM and 1.5 GHz processor for an archiving program that has an installation kit of 874 KB?
The program claims to dramatically compress your files, better than any software that’s been released so far.
The program definitely deserves its credit for the compression level. Also, the featured AES-256 encryption makes your archives not only small in size, but also secure (it allows you to protect your archives with a password too). You can also easily compress files right from Windows Explorer, since the application is integrated in the context menu.
If you’re planning on compressing larger files using the Very good (or higher) level, you will have to wait some time until the operation completes. The system resources needed for the program to run are high, and if you want both good compression and fast functionality, you must perform considerable upgrades on your computer.
Using the higher compression levels slows down your system and it’s faster to burn an entire DVD at 1x than archiving 1Mb with the maximum compression level. But for all compression levels under "very good" (including it) this is the best program I’ve used so far. It’s also free, so give it a try and see for yourself.