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I think you'd better reduce smoking by a few degrees.

The word means decrease or cut down. This sentence means stoping smoke by cut down smoking time.

Costs have been reduced by 20% over the past year.

to make costs less in price by 20%

I want to reduce my weight.

means decrease or make less my weight.

His illness reduced him to a skeleton.

ㅡThis means he is very thin as his illness. 'Reduce' in this sentence means 'weaken', or 'grow weakness'.

The town was reduced to ashes by the volcano.

It means the town was destroyed; lessened or lowered to nothing but ash.