I’ve found that you gain the most incremental compression at the lowest levels of compression. The more you compress, the harder you work for smaller and smaller compression gains. So I always set it to compress at the lowest level. That’s the best compression:CPU ratio.

Recycled from my High Performance WordPress session at WordCamp:

The important thing is to make sure you’re looking at the right measurement. File size reduction or CPU cycle reduction shouldn’t be your goals… your goal should be pages that load faster. Perceived load time. If your 80% size reduction is causing so much CPU strain that the time from click to load is actually higher, what’s the point? Bandwidth is cheap, but if a reader is frustrated by the time your pages take to load, you may lose them.

So I usually go with the lowest level of compression, because in my experience that makes the pages smaller without much (if any) CPU hit. But you have to test it… if your server is underpowered, it may be that even the lowest level of compression causes a CPU hit that impacts perceived load time.