FreeSoftwareTools.net

7-Zip is a file archiver that supports the creation/extraction of 7z, ZIP, GZIP, BZIP2 and TAR files, as well as the extraction of RAR, CAB, ISO, ARJ, LZH, CHM, Z, CPIO, RPM, DEB and NSIS files.

It is recommended to use the "7z" format from now on, because has a very high compression ratio using the LZMA compression. More technical informations about the "7z" format can be found here.
With few words "7z" format is better than "rar" or "zip" formats plus it is free and open source.
With 7-Zip you can create encrypted zip,tar,7z files using the AES algorithm (Rijndael).
The only problem with 7-Zip (the application) is that cannot decompress ACE files.
7-Zip Portable is a package for 7-Zip that is optimized for portable usage.