Can be reverted? Yes, using the same tool. Coupled with manual scrubbing, it can be bigger. Gain: Immediate (ISO dump size the same). Archive-quality dump? No (missing data). 
Of course, you can extract the ISO back from the GZIP archive. PCSX2 will build an index of each gzip compressed game it loads (as a file in the same directory as the gzip archive), so after the first time where you'll have to wait for the decompression, in all subsequent times there is no speed difference between playing an uncompressed and compressed game. Use 7zip ('Add to archive.' then choose to gzip) or Pigz (multi-threaded, much faster compression) to generate gzip archives containing the ISO file in question. PlayStation 3's ps1_netemu can also use it after packaging it into a PS1 Classic and installing said package.
Playable on Emulators? RetroArch, PCSX-R, and ePSXe. Playable on Hardware? On PSP, not on PS1. There's data loss, but it's negligible in terms of functionality. For commercial releases from PSN you will have to use PSXtract. For homemade EBOOTs it can be done by using the same tool to generate the BIN+CUE files. Tools Used:PSX2PSP, Popstation MD GUI, CDDA-ENABLER (optimized for PS3). Gain: Immediate (ISO size decreases a lot). 
Playable on Emulators? Only on recent SVN builds of PCSX-R and ePSXe (they also support 7zip/gzip/zip archives so use them with ECM). Check the hash with Redump to make sure nothing was altered. Can be reverted? Yes, using the same tools (unECM), however there is data loss (error correction data) which can damage a select few games. Drag-and-drop the ISO onto the specified tool, then compress it with 7zip. ECM only zeroes out redundant error correction data, but in some rare cases this data may be used for anti-piracy, hence corrupting the dump! However it does achieves drastic size reductions when compressed to an archive format (7zip/gzip/zip). 
Gain: Not Immediate (ISO size doesn't change). Archive-quality dump? No (removes error correction data permanently). sbi file in the same directory as the game file (in this case, the newly created CHD file) in order to run. If you have one of the European PSX games that features LibCrypt copy protection, then you will have a.
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