v220.127.116.11 will compress your image uploads. Prior to v18.104.22.168 the uploads would be the original "off the device" size.
If you want to increase your allowed upload size any higher than the current PHP setting you will need to make sure that you increase both upload_max_filesize and post_max_size as they both affect uploads. The System Requirements Test
script will report the current values of upload_max_filesize and post_max_size and will report the current maximum image size that you can use (which would be the lower of the two values).
Personally, I have my forums configured to allow 8MB uploads so that my users can upload files from their phones and digital cameras. For reference, my Nexus 6 produces a 13MP photo at ~4-5MB which is compressed into an image file less than 1mb.