I never heard of a problem with it, but it's really VERY limited compared to any serious compression software and lacks a lot of options, not to mention the much lower compression ratio.
I like WinRAR for the job, it's not free but with a lot of options and nice shell integration (not as full as the zip folders though). It also has an option called "data recovery record" that helps recovering damaged files, if you're concerned about file corruption.
7-Zip is another very good option and is free and open source. It's as fast as WinRAR and easy to use too, but not as intuitive. Also has a very good compression ratio generally.
Personally, I would never use the Windows built-in thing if given the chance of any other option.