1. A method for performing file differencing, comprising: identifying a plurality of regions in an original version of software image and in a new version of a software image, wherein the plurality of regions comprise compact functional differences (CFD) preprocessing regions; and preprocessing the plurality of regions, comprising, examining in the original version and the new version; identifying matching paths new version and the old version using approximate matching techniques; analyzing differences between corresponding regions in the new version and the old version; and describing the differences using a transformation that depends on values of groups of N bytes in the corresponding regions.