"In numerical analysis and computer science, a sparse matrix or sparse array is a matrix in which most of the elements are zero." Wikipedia
There are some datasets where instances have a large number of attributes. This dataset can be thought of as a sparse matrix if most of the recorded attribute are zero. In this scenario we could potentially have a very large file containing the dataset without an equivalent amount of "information."
One way to reduce the size of the dataset files without losing any information is to use a sparse file format. For example, an ARFF file can be stored in either dense or sparse format.
From Weka's documentation, the header information is the same between the two formats. The difference is in how the instances are represented. The instances in the dense representation look like this:
0, X, 0, Y, "class A"
0, 0, W, 0, "class B"
While a sparse representation of the same instances looks like this:
{1 X, 3 Y, 4 "class A"}
{2 W, 4 "class B"}
It can be seen that the first instance, where most of the attributes are nonzero, becomes longer in the sparse representation. The second instance, however, has mostly zeros as attributes and is represented more efficiently. If most of your dataset is like the second instance - if the dataset is a sparse matrix - then a sparse file format might make sense to reduce the size of storing the dataset with no loss in information.