What Does Unpacking Mean on Steam?
It's just Steam installing your game. After downloading, games are in compressed files. Unpacking is Steam extracting and organizing these files. It's a necessary step before you hit play.
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Unpacking on Steam is basically when you've downloaded your game and Steam is getting it ready to play. Think of it like coming home with a new toy and having to take it out of the box before you can play with it. After the download, Steam needs to install and sort all the game files properly, so you can launch and play without a hitch.
Too long; didn't read? Unpacking = Steam's busy making your game ready to play. Simple.
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