Mysql space reduction procedure

That ibdata1 isn't shrinking is a particularly annoying feature of MySQL. The ibdata1 file can´t actually be shrunk unless you delete all databases, remove the files and reload a dump.

But you can configure MySQL so that each table, including its indexes, is stored as a separate file. In that way ibdata1 will not grow as large. According to Bill Karwin's comment this is enabled by default as of version 5.6 of MySQL.

It was a while ago I did this. However, to setup your server to use separate files for each table you need to change my.cnf in order to enable this:

[mysqld]
innodb_file_per_table
http://dev.mysql.com/doc/refman/5.5/en/innodb-multiple-tablespaces.html

As you want to reclaim the space from ibdata1 you actually have to delete the file:

Do a mysqldump of all databases, procedures, triggers etc except the mysql and performance_schema databases
Drop all databases except the above 2 databases
Stop mysql
Delete ibdata1 and ib_log files
Start mysql
Restore from dump
When you start MySQL in step 5 the ibdata1 and ib_log files will be recreated.

Now you're fit to go. When you create a new database for analysis, the tables will be located in separate ibd* files, not in ibdata1. As you usually drop the database soon after, the ibd* files will be deleted.

http://dev.mysql.com/doc/refman/5.1/en/drop-database.html

You have probably seen this:
http://bugs.mysql.com/bug.php?id=1341

By using the command ALTER TABLE  ENGINE=innodb or OPTIMIZE TABLE  one can extract data and index pages from ibdata1 to separate files. However, ibdata1 will not shrink unless you do the steps above.