StackOverflow uses the GZip encoding on all of their pages; the same seems to be true for their websocket traffic since it seems completely obfuscated.

How/What would they use to achieve this; rather what would I need to do to achieve the same since my websocket server is hosted on its own separate server without IIS etc?
Worth noting too that the http compression is not set on their websocket connection request either.
Full log screenshot: http://i44.tinypic.com/19s4yr.jpg
According to RFC6455, WebSocket payload from client to server MUST be masked, server to client MUST NOT be masked. The masking is done by XORring payload with 32 Bit mask .. the value you see in your log.
There is a WS extension in the cooking that provides frame-based compression (deflate). This has nothing to do with masking. Payload with per-frame-compression active compresses payload, and then masks payload (client to server).