From Sega Retro
Nemesis compression is the method created by Sega to reduce the amount of space that graphics data takes up in a Sega Megadrive ROM. A decompression algorithm takes the compressed data, unpacks it and transfers it to the VRAM. The graphics can then be displayed on the screen. The Nemesis format is specifically designed for Megadrive graphics, as it relies on the length of the data being divisible by $20 (hex), which is the exact number of bytes in a single 8x8 tile. Although Nemesis is also used for 16x16 block mappings in Sonic CD, because the data conforms to the $20 rule.
Nemesis compression is named after Nemesis, the hacker who first discovered the format and created a program to decompress it. The format is used in numerous Megadrive games, especially Sonic the Hedgehog games.