Is the data compressed on the remote server (thus minimizing traffic on the wire), or locally? (I'd test this myself, but the company has really strict firewall rules in place.)
The pg_dump client doesn't get any special treatment in terms of the amount of data being sent over the wire from the server. It issues "COPY TO STDOUT" commands on the server and captures the results and, while packaging them up, performs any requested compression. To what extent the server compresses all its sent content I am unsure though it does some.
