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It will cause the textures to load in a compressed format and take up less space on your video card. Generally it won't have much effect on performance but if your video card has 32 megs or less it might make a difference.
If lowering your texture detail level helps you might trying turning on compression and turning up the texture detail level.
Compressed textures also contain some "artifacts" go they might look like overly compressed jpegs. To most people the artifacts don't look nearly as bad as running at a lower texture detail level.
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