The Unity Editor can import texture source files with a number of common formats, such as JPEG or PNG. However, GPUs do not use these formats at runtime; instead, they use different, specialized compression formats that are optimized for memory usage and speed of sampling operations.
You can configure the texture compression format for a texture asset in its import settings. When you add a texture asset to your project, the Unity Editor automatically chooses an appropriate compression format for each build target; however, most platforms support several texture compression formats.
Texture compression format can affect load times, GPU frame times, memory usage, visual quality, build size, and compression times; it is therefore important to understand this subject before you make changes to this setting.
For general information on texture asset import settings, see Texture import settings. For information on the recommended, default, and supported texture compression formats for each platform, see Recommended, default, and supported texture compression formats, by platform.
Bits per pixel (bpp) is the amount of storage required for a single texture pixel. Textures with a lower bpp value have a smaller size on disk and in memory. A lower bpp value also means that the GPU uses less memory bandwidth to read the texture pixels. GPU memory bandwidth can often be a frame rate bottleneck, and thus texture compression helps to avoid it.
The higher the visual quality of a texture asset, the higher the bits per pixel; which, consequently, leads to greater build size, loading time, and runtime memory usage. All texture compression formats are lossy, to some extent. Uncompressed textures offer the highest quality, but they also have the highest bits per pixel. Different texture compression formats offer different trade-offs.
In general, for the best runtime performance and size on disk, for most of your texture assets, you should choose a texture compression format that is supported by your target device, and has the fewest bits per pixel for the visual quality you want.
When you use a texture for a specific purpose, you can change its individual settings. For example, if you are using a texture with only one channel as a mask, you might choose the BC4 format to reduce file size but preserve quality. If you are using some textures for pixel-perfect UI, you might choose not to compress them.
Choose a format that your target platforms and devices support. When Unity loads a texture with a compression format that the device does not support, it decompresses the texture to the default uncompressed format for that platform and stores the uncompressed copy in memory alongside the original compressed texture. This increases texture loading time and uses additional memory. When Unity loads a texture with a compression format that the device supports, the GPU can use the data without any need for conversion.
Crunch is a compression format that works on top of DXT or ETC compression, by providing additional variable bit rate compression. When Unity loads a Crunch-compressed texture, it decompresses the texture to DXT or ETC on the CPU, and then uploads the DXT or ETC compressed texture data to the GPU.
Crunch compression helps the texture use the lowest possible amount of disk space, but has no effect on runtime memory usage. Crunch textures can take a long time to compress, but decompression at runtime is fairly fast. You can adjust how lossy Crunch compression is, to strike a balance between file size and quality.
If you are particularly concerned about the size of your build and Crunch is supported on your target platform, consider adding Crunch compression.
For information about texture import settings and how to set up platform-specific overrides, see Texture Import Settings.