Many companies distribute t-shirts in compressed form, by folding the t-shirt over many times until it takes on the shape of a small wedge or square, removing the air, and shrink-wrapping it. This is a common promotional item. I received one from Microsoft when they were recruiting on campus. I was disappointed to find that it did not explode outward when I unwrapped it, although it was extremely wrinkled. No problem -- just hang it up for a while, and the wrinkles magically disappear.
I simply must acquire a t-shirt compressing machine and compress all of my presently unused clothing. It would make packing a fun activity for the whole family, instead of an annoying chore.