By using all the bits of a byte, a text file, at the minimum, could be compressed to 7/8 of its original size. In fact, compression utilities can do much better than this and typically compress a text file to 50% or less of its original size.
All files are sequences of bytes containing binary patterns (bit patterns). But people often say binary file when they mean:
Binary File (colloquial): A file other than a text file. In such a file a byte might contain any of the possible 256 patterns.
An EXE file is a binary file, as is a Word file, as is an Excel file, as are all files except text files. People are often not careful, and sometimes say "binary file" when they really mean "executable file". The phrase "binary file" became common among MS/DOS users because DOS file utilities made a distinction between text files and all others.
Using the wrong type of file with an application can cause chaos. Don't send an executable file to a printer, or open an MS Word file with a text editor. Some applications are written to deal with several types of files. MS Word can recognize text files and files from other word processors.
Why are word processor files not called text files?