Basically, encrypted log files are HTML files which were encrypted by Plus! Live. When Plus! opens the log file, it checks the given password by decrypting a known signature in the log file and if that result matches the original signature, it decrypts the whole log file and stores it in a temporary location. Then, it loads that file in the Log Viewer window. In fact, you can encrypt any type of file with the Plus! encryption, and it'll work perfectly fine.
In my opinion, 2.75 MB for a log file is quite huge, assuming that they're just HTML files. HTML is just text, the images (smilies, wink thumbnails and the like) are stored in a subdirectory in the logs folder. So, I think that 2.75 MB of logged chat messages is quite big for a period of 8 days, and I doubt you have lots of other huge log files. Maybe you're just chatting too much?
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