I noticed that the GZIP compression option was no longer there in WordPress after version 2.5. This is recommended to be performed by the server now using mod_deflate.
If you don’t have access to mod_deflate, i.e. if you are on a uncooperative shared host, you can use this method using .htaccess …
Speed Up Your Blog Using ZLIB
If that doesn’t work you may be on a phpSuExec server. Create a file called php.ini in the root of your WordPress install with the following contents …
zlib.output_compression = On
You can test here:
http://www.gidnetwork.com/tools/gzip-test.php