Shorter description isn't understanding, let alone of it is lossy.
When you shorten a description in a lossy way, you are deciding a priori that some differences in the object don't matter, and it's not because you understand the object, but because it serves your goal of shortening the description.
I'm not aware of a better definition of "understanding" that would allow me to tell whether some system "understands" some other system. Do you happen to know one?
Or you actually do understand it.
You can't just assume smaller is better but it often is. And very often it's more information-dense.