Nikon D300 Complete Manual page 161

V1.02
To get back to 12 bits of data, a NEF converter such as
Capture simply does the following: the final form of lossless
compression in the file is undone, the shadow and mid-range
values are then decoded as is, while the grouped data is
placed at the center position of each group (e.g. the values
that were originally at 1023, 1024, and 1025 in the original
data that were grouped together will all be placed at 1024).
The resulting "uncompressed" data is finally placed in the top
end of 16-bit containers (computers operate most efficiently
with data that has 8-bit boundaries).
The problem, of course, is that there will now be "data gaps"
that get progressively larger as we go higher in value—many
original values in the highlight range are essentially rounded
to a different value, with the rounding being more aggressive
as we move to brighter and brighter objects.
With a single trip through this compression/decompression
cycle, D300 compressed NEF images are usually
indistinguishable from what you'd see with no compression.
Our eyes don't resolve the small differences that are made to
the data in the brightest areas of the photo. That's partly
because our eyes work in a non-linear fashion with brightness
(sensors are linear—this visually lossless NEF compression
scheme mimics our eye's non-linearity), but also because our
eyes generally are thought to distinguish tonal changes only
about equivalent to those produced by 8-bit RGB data. Even
with the visually lossless compression scheme used in the
D300, we still have the equivalent to more than 8-bits of
original data. Since we almost always reduce 12-bit data
down to 8-bits for printing anyway, the minor tonal loss that
these compressed NEFs introduce into highlights isn't usually
a big deal.
There is a slight possibility that the data loss introduced by a
setting of Compressed NEF will show up in some way,
though. Such changes would appear mostly in the highlight
detail, and only if you made very dramatic post-processing
Thom Hogan's Complete Guide to the Nikon D300 Page 161