From what I understand everything above TeX is one giant text manipulation macro, which means it all has to be available to the programs in text form, you could compress it but that would me decompressing hundreds (thousands?) of files every time you compile.
I understand, but I'm not convinced that the macros couldn't be somehow compiled down to some more compressed binary representation. Regardless, I still think keeping them on disk in a tarball or something would be more economical. Decompression can be quite fast if the right compressor is used.
> I understand, but I'm not convinced that the macros couldn't be somehow compiled down to some more compressed binary representation.
My understanding is that this is what .fmt files are for. I'm not sure where the line is drawn between what goes in a .fmt file and what is packaged as ordinary TeX code; I imagine that, like much else about TeX (which I love), it reflects the machine constraints with which Knuth was faced while writing it (in the late '70's and early '80's).
