Yep. The browser sends an "Accept-Encoding" header as part of its request (with a list of what it supports). And the server can respond back with one of the encodings listed. Most modern browser support compression I believe.

Thats pretty kickin. If I made websites for a living I would look into that further.

gzipping saves bandwidth at the cost of cpu cycles. So it may or may not be a good idea, depending on what you are trying to save.

Most people who work on large scale websites know about it :)