It may be splitting hairs, but data compression is a hot-button issue for me...
What happens, in my experience, is that iCloud Photo Stream
resizes the images, in sizes optimized to the resolution of the device's screen. Increasing "compression" implies returning a lower-quality (more aggressively-processed) JPG, and that, apparently, is not what's happening. (I could test this empirically, but time is short today.)
While in both cases, data
is being thrown out, in resizing the effect is limited to adjoining pixels. In the case of aggressive JPG compression, the effect can range far beyond the immediate region.
One of the most obvious examples of this is in sunset photos, where aggressive data compression can result in a series of concentric bands, like an archery target - many pixels across a large area are very close in value, so many of them will be averaged to a single value.
While Apple is not explicit about whether it's resizing or resorting to heavier compression in
http://support.apple.com/kb/HT4486 , "device-optimized resolution" strongly implies resizing, rather than greater compression.
What resolution are My Photo Stream photos?
On a Mac or PC, your photos are downloaded and stored in full resolution. On iPhone, iPad, iPod touch, and Apple TV, your Photo Stream photos are delivered in a device-optimized resolution that speeds downloads and saves storage space. Dimensions will vary, but an optimized version of a photo taken by a standard point-and-shoot camera will have a 2048 x 1536 pixel resolution when pushed to your devices. Panoramic photos can be up to 5400 pixels wide.
