This book shows how to use the LZexpand API to decompress files. LZexpand decompresses files (on file by file basis, so not archives like zip files) compressed with compress.exe. Compress is a microsoft utility, part of the NT resourcekit. I don't know if it's available for free somewhere.
The demo needs a book called test.tbk compress to test.tb_. This can be done with COMPRESS -r test.tbk or COMPRESS test.tbk test.tb_. The NT version seems to work fine under windows 95 too.