I know that this might be a linux compression, but what about, tar or gz? what are their compression rates?
Tar is just an archive, it doesn't compress. In linux you tar the files up, and then compress the tar as .Z .gz .bz2 or .lzma
.Z is a lageacy gnu zip format, you don't see many of them around. gzip is a cousing of winzip when it comes to algorythm, and achieves similar performance. BZip2 has been the defacto standard in linux high-compression for years. Its about at RAR levels.
LZMA is what many distributions are using now for package compression. Its 7-Zip's compression algorythm with the 7z archive format (which doesnt support unix permissions) ripped out. Or vice-versa, depending on point of view.
For my huge project, the Last Stand, which will likely be at least 200Mb in size, I am looking into making a self-installer, just to avoid the installation support. I will do my best to use the highest possible compression method however.
But yeah, 7zip isn't so widely used as rar or zip, so that's the reason most people choose to pack their mods using these two.
Like someone else said, I see far more 7z than I see Rars these days, except for warez.
As far as the installer, 7zip's SFX is, like all SFX, not really suited to that stuff. Happily NSIS can do pretty much anything under the sun, installer-wise.
In fact, one of NSIS' compression algo's - lzma-solid - is the equivalent of the .lzma files used in linux, aka 7-Zip's compressor right from the SDK. If you wanna ssqueeze every last meg, however, there's Nsis7z, which is an extractor plugin built from the recent 7Zip SDKs that lets you use 7z archives made with x64 7-Zip at custom (read: insane) settings.