The research paper is titled "Language Modeling Is Compression," and if I understand the Ars article correctly it explores the idea that "the ability to compress data effectively is akin to a form of general intelligence... So theoretically, if a machine can compress this data extremely well, it might indicate a form of general intelligence—or at least a step in that direction."
A much more interesting question than "will we have smaller FLAC files next year."
I'm sorry, but I think that's just arstechnica dreaming. Current LLMs are trained pattern generators. Very advanced pattern generators admittedly, but there's nothing "intelligent" in the fact that they can replicta patterns in audio or image data despite being trained on text. It's just somewhat different patterns. LLM have no understanding of what they are doing, they lack the ability to reflect or make logical deductions and don't recognize their own mistakes.
Concerning the article: It's not surprising at all that an LLM over a hundred GB in size can compress data better than a PNG implementation which is typically below 1 MB. I know I may sound disillusioned saying this, but in the end, it's a trivial "cheat": They simply took some of the file's entropy and packed it into the compression algorithm a.k.a. the LLM. If you send a file turbo-compressed by the LLM to anyone else, they still need to acquire that LLM to decompress anything. Typical compression algorithms have implementations which are a couple of MB and their size is usually irrelevant considering the amount of data that is being processed. The opposite is true for the LLM-approach presented here. The LLM approach "cheats" by requiring you to effectively pre-load fractions of billions of files' entropy before even starting to work. That's why it compresses well.
Compression always is a trade off between algorithm complexity, runtime computational effort and file size. According to this article, LLM's don't change that a all. They trade insane algorithm complexity and a significant runtime computational effort for somewhat smaller files.