jQuery boasts how small it is when gzipped. However, their website doesn’t seem to offer a gzipped version, both the production and development are not compressed. So I’m wondering if doing the traditional
<script src='http://code.jquery.com/jquery-1.6.4.min.js'></script>
automagically does the gzip compression for me.
Ordinarilly, gzipping is a server-level feature. If your web server supports gzip compression, it will compress it before sending it to the client. (providing the client supports this) If your browser is able uncompress gzip, it will handle this for you. (I am pretty sure that just about every browser out there has had this built-in for quite a while now)
So to answer your question, it is automatic, since Google’s servers will support this. The only hitch would be the client, but that shouldn’t be an issue either.
If you are maintaining your own server, you’ll need to make sure it’s configured appropriately.