Yes, Cloudflare gzips resources that pass through our network. We also gzip items based on the browser's useragent to help speed up page loading time.
If you're already using gzip we will honor your gzip settings as long as you're passing the details in a header from your web server for the files.
Cloudflare only supports the content types GZIP and None towards your origin server and can also only deliver content either GZIP compressed or not compressed at all. Cloudflare's reverse-proxy is also able to convert between GZIP and none, meaning that it can pull content from a customer's origin server via GZIP and serve it to clients uncompressed (or vice versa). This is done independent of caching.
Please note: The Accept-Encoding header is not respected and will be removed.
Related: What Cloudflare gzips