A toggle in: Settings > Personalization > Taskbar > Taskbar behaviors
Small icons allow the user to pin more applications to the taskbar before the icons become too small to identify or before the taskbar becomes overcrowded. This is ideal for power users who rely on quick-launch pins rather than the Start Menu or desktop shortcuts. windows taskbar small icons
Shrinks icons only when you've run out of space. Never: Keeps the default large size. A toggle in: Settings > Personalization > Taskbar
On standard 1080p monitors or smaller laptop screens, the default large taskbar can consume a noticeable chunk of vertical space. By switching to small icons, the taskbar height drops from roughly 40-48 pixels to about 28-30 pixels. For users working with limited vertical resolution, this provides extra room for documents, web pages, or code editors. Never: Keeps the default large size
If you're looking to adjust other aspects of your taskbar or deal with icons in the system tray (next to the clock), you can further customize your taskbar settings through the same settings window. For instance, you can choose which system icons appear in the system tray or decide whether to combine taskbar buttons when the taskbar is full.
In Windows 10 and 11, combining icons is the default behavior (icons stack, text is hidden). If you want to see the text labels alongside your small icons (like the classic Windows XP/7 style):