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When attempting to unversion an ArcSDE database in ArcCatalog, the following error message occurs:
"The following versioned objects contain edits which haven't been compressed"
Even if all versions are reconciled and posted, but have not been deleted, you will still get the warning in ArcCatalog.
This is because each of these versions still references specific states of the database which are NOT compressed.
Reconcile and post all versions and then delete them before compressing.