An archive bundles a directory tree. Compression reduces the stored representation, but creating a file with a tar.gz suffix doesn't prove it contains a restorable tree. Extract into a separate location and inspect nested records. Keep the original until the restore has been checked.
tar can combine creation with gzip compression; gzip and gunzip also operate on individual files. The exercise checks both the archive and restored content, including a nested verification record. In tar -czf bundle.tar.gz source, c creates an archive, z selects gzip compression, and f introduces its filename. Use tar -tzf to inspect members before extracting. The -C option chooses the extraction directory. A restore check must read the extracted files; the presence of an archive filename alone can't establish that those records survived.