Posted in another thread, elaborating on why S3TC is no magic bullet:
Originally Posted by curaga
Yep, at the cost of quality. And this leads game devs to use 2x the resolution for the S3TC-compressed textures, creating a net zero VRAM change. (512x512 uncompressed to 1024x1024 compressed, for example).
Not in all cases of course, but this is rather common.