The most common approach is to simply redefine the ‘\baselinestretch’ variable in the preamble of the document. The parameter controls the scaling of the space between the bottom of two successive lines of text. Therefore, the definition used to squeeze that space by 2% is:

\renewcommand{\baselinestretch}{0.98}

While that trick alone is sufficient in most cases, it is useful to be aware of other spacing parameters that can be adjusted. The Cambridge University Engineering Department has a nice page with lots of details. I personally find ‘\textfloatsep’ to be one of the more useful ones:

\addtolength{\textfloatsep}{-5mm}

It is used to reduce the amount of space that is usually left between a float and the adjacent text block (e.g. end of caption of a top-figure and the text below).