Yes, it works both ways.
There are no problems that have ever been raised about it, and none that I'm aware of.
Obviously there is an overhead for the extra processing required, but you might find it makes a significant difference for you, especially if you transfer a lot of text files. If you transfer a lot of images, or other formats which aren't easily compressed, or which yield a low compression rate, then you'll probably get an overall slowdown. You'll have to try it and see!

Since it won't benefit everyone and can actually slow things down for some, I've left the option off by default.