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Encoding
Encoding is the process of transforming data from one format into another. In Vertica, encoded data can be processed directly, which distinguishes it from compression. Vertica uses a number of different encoding strategies, depending on column data type, table cardinality, and sort order.
The query executor in Vertica operates on the encoded data representation whenever possible to avoid the cost of decoding. It also passes encoded values to other operations, saving memory bandwidth. In contrast, row stores and most other column stores typically decode data elements before performing any operation.
Compression
Compression is the process of transforming data into a more compact format. Compressed data cannot be directly processed; it must first be decompressed. Vertica uses integer packing for unencoded integers and 
LZO for compressible data. Although compression is generally considered to be a form of encoding, the terms have different meanings in Vertica.
The size of a database is often limited by the availability of storage resources. Typically, when a database exceeds its size limitations, the administrator archives data that is older than a specific historical threshold.
The extensive use of compression allows a column store to occupy substantially less storage than a row store. In a column store, every value stored in a column of a projection has the same data type. This greatly facilitates compression, particularly in sorted columns. In a row store, each value of a row can have a different data type, resulting in a much less effective use of compression.
Vertica's efficient storage allows the database administrator to keep much more historical data in physical storage. In other words, the archiving threshold can be set to a much earlier date than in a less efficient store.