How zcat works?

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http://www.unix.com – Hi, just i would like to know, how will be the response if you try to read a 40GB compressed file using zcat. a)Uncompress the 40GB file and have it in the disk. use cat to view the steps. b)Use zcat directly to view the compressed file? What are the steps being occurred in step (b)? Where does actual compression takes place? Which one is the best way to handle this scenario? Thanks (HowTos)