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The process known as minifying, or minification, happens when all of the unnecessary characters are removed from source code in order to reduce file size. This can greatly improve page load times for websites since the files being sent over the internet are much smaller.
Although characters are removed from the file, no functionality is changed since, in general, white space is ignored by web browsers. White space refers to the extra spacing and line breaks added to code to make it more humanly readable. While this white space makes modifying code much easier, it is unnecessary for web browsers.
Some people also think that since the white space is gone, it may be harder for people to copy websites or steal designs when files are minified. Although all of the source code is still there, it does make it very difficult to see what's happening on a web page simply by viewing the page source.
Most Joomla Templates have some kind of built in minify feature. If you're using an older Template that does not have this feature, there are Extensions that provide this function as well. JCH Optimize is one such Extension.
When used in conjunction with combining files and compressing them, minifying web resources is a very important step in optimizing a Joomla website.