> I was speaking in the context of humans.

So was I.

> One decompress it when they can generalize and apply it.

Generalizing is compression. Generalizing and applying are very different things.

> So understanding is compressed, but is not the act of compressing.

Understanding (noun) is compressed. Understanding (verb) is the act of creating understanding (noun) and is compression.

> The larger data it represents never existed.

The larger data is everything you take in about the subject. Experience and instruction.