Raymond Hettinger added the comment:

xz will likely be the best win -- it is purported to compress smaller than bz2 
while retaining the decompression speed of zip.

As Antoine says, the usual practice is to add py, pyc, and pyo files to the 
compressed library; otherwise, there is an added cost with Python tries to 
write a missing pyc/pyo file.

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<http://bugs.python.org/issue17004>
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