On this Oracle page Java HotSpot VM Options, it lists -XX:+UseCompressedStrings as being available and on by default. However in Java 6 update 29, it is off by
-XX:+UseCompressedStrings
In OpenJDK 7 (1.7.0_147-icedtea, Ubuntu 11.10), the JVM simply fails with an
Unrecognized VM option 'UseCompressedStrings'
when JAVA_OPTS (or command line) contains -XX:+UseCompressedStrings.
JAVA_OPTS
It seems Oracle really removed the option.