A file extension that has become more popular in the past few years. A contraction of .tar.gz, it is placed on files that have been tarred and then gzipped.

This absurd 3-characterism is "justified" by the existence of some videogame console software that has (or used to have, and still has in some weird ways) an 8.3 limitation on filenames. But it makes no sense at all on the systems where it is most common -- UN*X boxes.

To create such an archive, use the z option to GNU tar:

tar czf my-tar.tgz .
Or, if using a generic tar, pipe your output to gzip:
tar cf - . | gzip -c > my-tar.tgz

To untar, again add z for GNU gzip, or pipe input from gzip:

gzip -dc ./my-tar.tgz | (cd /path/to/there; tar xf -)