[tomsthumb]

I’m semi-sure that this is possible with .tar.gz files already. I’ve used vim to view a text file within a few different rather large archives without noticing the machine choke up on extracting several gigs before showing content. Certainly nothing was written to disk in those cases.

[jcrawfordor]

.tar.gz files can only be read sequentially, but there are optimizations in place on common tools that make this surprisingly fast as long as there's enough memory available to essentially mmap the decompressed form. The problem is bigger with archives in the tens of GB (actually pretty common for tarballs since it's popular as a lowest-common-denominator backup format) or resource-constrained systems where the swapping becomes untenable.

[seba_dos1]

There are extensions for gzip that can make it coarsely seekable, I wouldn't be surprised if some archive tools used that.