I really appreciate the comments and arguments.

@cdiebolt.. The language of the question is tricky. The intention was to ask about the performance of the server affected. However the size of the backup definitely is reduced by a good margin because of Page/Row level compression.

@hugo Kornelis.. Thanks for the elaboration on all the options. I would like to mention a few things about the comment you made about the sql log compression. The log is definitely not getting compressed and hence has no benefit. On the other hand the size of the backup is reduced cause of the database compression and not because of any compression on the backup. However your comment about the log compression saving bandwidth is actually exploited in SQL Server 2008 Mirroring as mentioned in this link http://msdn.microsoft.com/en-us/library/cc645581.aspx

@CirquedeSQLeil.. Didn't get what you intended to ask but then log's are not compressed when you set up database compression. Hope that helps.