We needed a library for creating and managing ZIP files and fortunately for us there is DotNetZip which I have encountered previously when going around CodePlex (as I use to do when there is a little free time). [more]
It is licensed under Microsoft Public License, so you can use it free of charge, for any purpose, but there's no warrant. For more information I would suggest checking the site.
It makes use of the System.IO.Compression DeflateStream class which is new to .NET 2.0 to perform the compression.
Our requirements are not that complex yet so I haven't ran into any issues with the library except some issues inherent in the DeflateStream class such as compressing an already compressed file could increase the file size.
Another cool find at CodePlex and thanks to the author, Dino Chiesa for such an excellent library.