Memory is a precious commodity in computer systems. Advances in memory architecture has been a lot slower than say everything else in a computer. Add on top of that, bandwidth is an even more precious commodity.
You have your CPUs and GPUs which process tons of information but if you don't have a fast enough Memory and bandwidth, they will be sitting idle most of the time waiting to be fed information.
You have 2GB storage to work with and you can transfer a file at 1GB/s from that storage to your CPU and GPU. it will take 2 seconds transfer 2GB worth of data. This is where compression comes in. If you compress the file, you can fit more things into the storage essentially giving you twice the storage. You can now fit 4GB worth of data into only 2GB worth of storage therefore you can transfer 4GB worth of data to your CPU and GPU giving them better utilization.
Compression comes at a cost of CPU performance because in say a regular computer, you have to use a CPU core or 2 dedicated to just compressing and decompressing data. That is not ideal in a console because you don't want to take away CPU cores that can be used for anything else. Here comes dedicated ASICs who's sole purpose is to be really good at compressing and decompressing data. The CPU is free to do other things while the ASIC will just keep compressing and decompressing data all day everyday without breaking a sweat.
To tie it to XSX and PS5.
XSX has a 1TB SSD that has a RAW bandwidth of 2.4GB/s they also have a decompression system that can handle doing 6GB/s. Meaning you can transfer 4.8GB worth of compressed data without breaking a sweat because they have 1.2GB/s overhead.
PS5 has a 825GB SSD that has a RAW bandwidth of 5.5GB/s, they also have a decompression system that can handle doing 22GB/s.
Meaning they can transfer 11GB worth of compressed data without breaking a sweat because they have 11GB/s overhead.
You always want to compress because you get more out of your storage and IO.
Well, Mark Cerny literally said you don't need that hassle, you download those assets on the fly. Not sure if you watched the small parts of the first 2 videos, that answers everything you've pointed out. Regards