GZIP compression makes pages quite alot smaller. This first of all saves bandwith because less data is sent from the server, but it also means that pages can load faster to the client.
The compression indeed does cost some CPU power, but in a lot of cases this isn't really a problem because the advantage of less downloading time saves a lot of memory.
For instance in an exagerated example:
It takes 1 second to generate a page, which then takes another second to send to a user. So the whole process of requesting a page to actually having sent it takes 2 seconds.
Now if you enable gzip, it may take 1.1 second to generate the page, 1 second for the generation and 10%, or 0.1 second to gzip the data. Say it compresses a page by 50% it will then only take 0.5 seconds for the client to download the page.
The entire process now only takes 1.6 seconds instead of the 2 seconds it did before.
This actually saves alot of memory because the time that data lives on the system is shortened and less webserver processes are required the serve the same number of pages.
p.s.
Another great way to speed of a php system greatly is to compile all php pages, this can cause a speed increase of up to 5 times!!
http://eaccelerator.net/" target="_blank