This is where Keil wants to make a bit of money with. The free C-compiler is limited in the optimization level which is probably set to zero (0) in debug and set to larger than 5 in release mode. The effect of optimizing is not as dramatic as one may hope, but when your project really gets tight in flash-memory (after switching off ECC) you will have to buy Keil's compiler. I remember that a forum member dis this and was a bit dissapointed about the small effect of using better optimization.
Thanks, I will just ignore the message then.
Code optimisation for 8051 can be achieved using various methods. If you are limited on Flash size and need to sqeeze in additional code by optmising the existing code, you might want to check out this App Note,
PSoC 3 - 8051 Code Optimization - AN60630