What does Compact Tabs do? Makes more room for page titles in the the Firefox tabs bar by removing the extra white space, making them appear a bit more compact.
It might also be worth mentioning that this add-on will not change the size of the tabs, only the spacing used inside of a tab. Used alongside NoOverflow it allows your tabs to remain readable much longer before having to scroll.
Want to check out this add-on? Pick it up at the Firefox Add-ons website.