Capacity optimization technologies are similar to data compression technologies, but they look for redundancy of very large sequences of bytes across very large comparison windows.
Typically using cryptographic hash functions as identifiers of unique sequences, long (8KB+) sequences are compared to the history of other such sequences, and where possible, the first uniquely stored version of a sequence is referenced rather than stored again.
Capacity optimization generally refers to the use of this kind of technology in a storage system. An example of this kind of system is the Venti file system in the Plan9 open source OS. (Source code is available here). There are also implementations in networking (especially Wide Area networking), where they are sometimes called "bandwidth optimization" technologies (technical references include this).
For the rest of the Wikipedia entry on the above term, go here.
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