When compressing and replacing multiple entities with one long entity, it is like putting in a line of best fit. It is unlikely that it will cover the exact path of all the old entities. This sets the margin of error. If the replacement entity is too far away from the original, then it won’t be added in and no compression takes place. The larger this number, the more likely a set of entities will be compressed, but the more deformed the shape will become. As Max line length, this divergence should be proportional to the part size.
Check the Guide for more information: