Lag fixing using OCLF - could it do any harm? I am wondering if the lag fix proposed by xda-developers could harm the device in anyway.
Quote from Google Code "Original use was for 'One Click Lag Fix' for the Samsung Galaxy S series, to create a loopback EXT2 device on top of Samsung's RFS in order to improve response time for applications."

Link to forum page about this: here.

How does it work exactly? What does "create loopback EXT2" mean?

I know the forum post clearly states it's been tested on a huge number of devices and it's working, but I want to understand what it does exactly and if there is any compromise by installing it?
Thank you.
Basically, it tricks the Android OS by using symbolic links and a large file formatted as ext2, rather than partitioning or formatting your device storage.  In this way it's very safe.  I've used it several times on several ROMs on my Galaxy S with no problems.