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This window is available in the Sprite and Tile-Set editors. It's used to compress large graphics so that they take up less space on the video card. This can result in faster loading times and uses less hard drive space for the trade-off of lower quality graphics.
Padding - when ticked, this spaces out the rendering of tiles by a single pixel to prevent the edges of neighboring tiles from being picked up.
PVRTC is a high loss, fixed-rate texture compression format which is primarily used for mobile game development. Compressing resources is recommended for Android games for the purpose of a lower memory footprint, faster loading times and reduced power consumption.
On - when ticked, this enables the compression.
4-bit - when selected, this compresses graphics at a ratio of 8:1 (less compression, higher quality).
2-bit - when selected, this compresses graphics at a ratio of 16:1 (more compression, lower quality).
Quality - sets the amount of graphic quality (higher numbers mean better quality but it takes longer to compress).