Dynamically expandable and contractible fault-tolerant storage system permitting variously sized storage devices and method

A dynamically expandable and contractible fault-tolerant storage system permits variously sized storage devices. Data is stored redundantly across one or more storage devices if possible. The layout of data across the one or more storage devices is automatically reconfigured as storage devices are added or removed in order to provide an appropriate level of redundancy for the data to the extent possible. A hash-based compression technique may be used to reduce storage consumption. Techniques for freeing unused storage blocks are also disclosed.