From David Bandel
pppd allows two compression schemes.
bsd_comp is a compression algorithm for ppp. It is supposed to speed up transmissions over ppp circuits. That said, in order to use it, you have to specify it in your /etc/ppp/options or /etc/ppp/peers/provider file:
bsdcomp min,max where min and max are values from 9-15. If you specify only one value (min), then it will try for that value alone. I don't recommend 15 (the max) on an old, slow 386 w/ 16Mb or less of RAM (actually a system like that should not try to do compression at all).
ppp_deflate is used in lieu of bsd_comp if it is found (and supported by the remote end). It is specified thusly:
again min and max are values from 8-15. See above para
for the rest of the info.