Da:Sourcerer, on 03 May 2012 - 01:29 PM, said:
The performance of deflate/gzip/bzip2 depends on the input

Well I said gzip because I voted for max indentation, so that gives lots of useless spaces for the browser's interpretation.
gzip (any?) compression algorithm should be effective because we're talking about HTML (text) files.
My home page with very good HTML/CSS separation weighs 18,534 bytes for the HTML alone (230 lines). It's gzipped to 5,256 bytes. With no indentation at all, the same HTML weighs 14,682 bytes. When gzipped, it's 5,039 bytes.
See my point? 200 bytes are imho worth the indentation. And I'm not even using mod_deflate because I don't have it on my shared host.
Now, according to my experience, sometimes proper HTML output indentation is necessary because a closing tag is possible to miss, and browser interpretations can vary, especially prior to HTML5 (which introduces optional closing tags by design). And Safari inspector (the one I use most for HTML) show only beautified/indented and even closed-tag HTML code, so it's not the exact copy of the source. I think I remember FF has the same behavior… but maybe I'm wrong.