The documentation for wofapi.h says merely “This header is used by Data Access and Storage.” For more information, it refers you to another web page that contains no additional information. WOF stands for Windows Overlay Filter, which is a nice name that doesn’t really tell you much about what it does or what it’s for.

Changing the native NTFS file compression would be a disk format breaking change, which is not something taken lightly. Doing it as a filter provides much more flexibility. The downside is that if you mount the volume on a system that doesn’t support the Windows Overlay Filter, all you see is an empty file. Fortunately, WOF is used only for system-installed files, and if you are mounting the volume onto another system, it’s probably for data recovery purposes, so you’re interested in user data, not system files.