Compression is all about losing bits of information that the brain won't be able to interpret. Of course, if the compression is too high, the encoder has to take massive leaps to obtain it, which is where we do notice it.
If its with music, its losing bass or treble information (if its too high), or, just losing bits the brain won't be able to tell apart. For example, a few bytes after a loud sound, or, just certain qualities like that.
With video, its major banding issues, and stuck areas of pixels (if its too high), or just only changing parts off the image that is moving, if its done right.
WHY YOU SHOULD NOT SAVE A DVD UNCOMPRESSED:
A DVD isn't uncompressed. Its compressed using MPEG-2, so some of these artifacts are there, but the brain cannot usually see them.
Saving a movie uncompressed from a DVD is wasting valuable space, since EACH AND EVERY FRAME will be saved as is, including what the MPEG-2 compressor was trying to get rid of in the first place. The DVD artifacts from the original compression will still remain, but saved fully, and taking up loads of un-necessary space as a result.
Whereas if you used a compressor on the DVD, like for instance MPEG, you will mostly save the movie as is (as on the DVD), but the compressor would have removed what the DVD encoding using MPEG-2 saw in the first place (for instance parts of images not moving), so you'll get a movie that will still take up maybe 4GB if its DVD standard, and not many many GB's uncompressed.
Doing that is exactly the same as you recording a piece of music using software at 128kbps for example, but then upconverting that saved data later, at 320kbps. You are making the file around 3 times bigger, but it is actually recording the blank space as silence. You cannot bring back quality from upconverting an already compressed image or sound.
I hope I explained that well...
HOW I BELIEVE IT WORKS:
You see, a encoder splits the image up into squares as it were.
The lower the compression, the more squares, but also more space used
So, take for example, if there were 4 squares of colour on the screen and the squares swapped colours every few seconds. Maybe:
Right, now you want to capture this movie and want to retain space.
Now, set to a good level using a good compressor, it may only save the information needed to change those squares colours, every few seconds.
It won't save the time inbetween, where they are not changing.
If it was set to too high of a compression, since the decoder splits the video into bigger bits, you may see parts of the squares not changing colour at the right time, and you may get cut off points where some parts have changed and some haven't.
Thats the simpliest way I can explain it in my own words
Of course, on a standard DVD compression, it's a lot more complex. On a sky scene for example, with maybe a moving car, but nothing else going on, except for maybe small shadow changes, only the car, and the resulting squares of compression that are changing will be updated at every frame.