Doese the "Compression" in DNG Converter compress the JPEG preview or the DNG file?

In the Prederence dialog of DNG Converter, there's is an option "Compression", does it compress the JPEG preview or the DNG file?

Since the compression is a "lossless" compression, nothing is lost except file size.  I saw a string where somebody had asked why his resulting DNG files were so huge?  The answer he received stated that he shouldn't have unclecked the "lossless compression" option from the "change preferences" menu.
So basically, I don't know precisely what the lossless compression compresses or what the "extract" button--as opposed to the "Convert" button--does, but I can tell you that the G10 RAW files (*.cr2) get converted flawlessly to slightly smaller *.DNG files.  Enjoy!

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