You should have Read The Fine Manual... 'tar' doesn't compress, tar only compact all files in an archive. Then you can compress the resulting .tar archive with pack, gzip, bzip2 ... GNU tar can compress and archive at the same time, with the 'z' (gzip) or 'j' (bzip2) flags :
tar czf file.tar.gz file1 file2
tar cjf file.tar.bz2 file1 file2