Every form of matter has sub-atomic space that can be compressed to a greater density. Water is no exception but the pressure required would likely be greater than a fixed size container can structurally withstand. For all practical purposes water cannot be compressed.
The reason that objects become smaller with radial or linear distance is because we have two eyes and view objects from each eye creating a triangle from the object to the location of each eye. The brain coordinates both views into a single image. The coordination of separate views creates as...