I am using a 249 megabyte drive as a backup drive on my xp system. I have it formatted in NTFS and compressed, yet the size of the drive is still the same as before I compressed it. Why?

Actual disk size cannot be changed. By applying compressed attribute for the volume you just ordered operating system to try to compress any object that will be placed there.

If object that is placed onto the volume can be compressed, operating system compresses it and it takes less space on the drive than uncompressed one. Thus more free space is left on the drive for other data.