xz is a lossless data compression program and file format

xz is a lossless data compression program and file format which incorporates the LZMA2 compression algorithm.

xz is essentially a stripped down version of the 7-Zip program, which uses its own file format rather than the .7z format used by 7-Zip which lacks support for Unix-like file system metadata.[2]

Compress the file foo into foo.xz using the default compression level (-6):
# xz -zk foo

Decompress bar.xz into bar and don't remove bar.xz after decompression:
# xz -dk bar.xz

Using xz with tar (compress):
# tar Jcvf foo.tar.xz /home/backup

Using xz with tar (decompress):
# tar Jxvf foo.tar.xz

Reference:
http://en.wikipedia.org/wiki/Xz