Maybe your already know that web servers can compress outgoing content. Compressed content arrives at the browser which decompresses it and is able to render it. This is all generally seamless to the user and results in a more effective use of bandwidth. Now, compressing static files (like .html files) is a no brainer for web servers. They simply pre-compress the files and store them in a file cache somewhere. When the original file is called for the web server serves up the compressed file instead.
Dynamic files are more problematic. There's no correlation between the file name and the buffered output of a ColdFusion page for example. Consider search results. One user might receive 10 results and another user might receive 10 completely different results. Still another user might receive 100 results. How is the web server supposed to compress that data? Like your app server it does it "on the fly". It waits for ColdFusion to return the response buffer, compresses the file in memory (as I understand it) and then outputs the buffer to the browser. At least that's the way it works in theory. In practice you might find that ColdFusion 9 and IIS 7 don't quite have this figured out yet.
Before I give you the blow-by-blow (and thankfully a solution) I want to make it clear that this problem and solution come to me by way of my good friend and colleague Vlad Friedman of Edgeweb Hosting. EdgeWeb consistently receives the highest possible reviews from its customers and Vlad is one of the brightest folks I know in our corner of the IT world. Now let's talk about our little problem shall we?