edit your http://yourmagentourl/.httaccess file
############################################
## enable apache served files compression
## http://developer.yahoo.com/performance/rules.html#gzip# Insert filter
SetOutputFilter DEFLATE# Netscape 4.x has some problems…
BrowserMatch ^Mozilla/4 gzip-only-text/html# Netscape 4.06-4.08 have some more problems
BrowserMatch ^Mozilla/4\.0[678] no-gzip# MSIE masquerades as Netscape, but it is fine
BrowserMatch \bMSIE !no-gzip !gzip-only-text/html
# Don’t compress images
SetEnvIfNoCase Request_URI \.(?:gif|jpe?g|png)$ no-gzip dont-vary# Make sure proxies don’t deliver the wrong content
Header append Vary User-Agent env=!dont-vary## enable resulting html compression
php_flag zlib.output_compression on
Source: http://www.xpcdesign.com/2008/09/speed-up-magento-by-235/
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