Computationally inexpensive sound compression is always difficult, at least if you want some quality. One could think, for example, that taking the 8 most significant bits of 16 bits will give us 2:1 (lossy) compression but without too much loss. However, cutting the 8 least significant bits leads to noticeable hissing. However, we do not have to compress linearly, we can apply some transformation, say, vaguely exponential to reconstruct the sound.
That’s the idea behind μ-law encoding, or “logarithmic companding”. Instead of quantizing uniformly, we have large (original) values widely spaced but small (original) value, the assumption being that the signal variation is small when the amplitude is small and large when the amplitude is great. ITU standard G.711 proposes the following table: