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Regarding the CPU use comment...
On 95%+ of all dedicated servers (likely more, but I don't care to try to filter statistics on a sunday afternoon...) CPU is basically idle. Customers have unfortunately been duped by crap marketing from hosting providers basically telling them MORE BIGGER BETTER with regards to CPU, and thus we have to compete in that arena (even though during pre-sales, we absolutely try to point out that the dual xeon for your 2mbit of traffic is likely overkill).
In almost all cases, your largest bottleneck will be disk I/O. Period. Gzip in this manner helps with that, as the files are smaller. mod_gzip trades cpu use for bandwidth savings - so it's a tradeoff you have to decide if it's worth it or not.
That said... If you can use mod_gzip instead of this solution - do so. It will be a huge savings in CPU, probably by a factor of 10 or more. However, as Jayeff mentions mod_gzip doesn't play nicely with some applications making this a great solution for those PHP pages that you otherwise couldn't gain bandwidth savings on.
Good post!
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