Because I keep forgetting: here's a one-liner to immediately compress drush sql-dump output with bzip2. This'll work for any command that generates output, such as mysqldump and tar.
$ drush sql-dump | bzip2 > filename.bz2
If no option is provided, bzip2 assumes -c (compress).
Now, to decompress:
$ bzip2 -dkf filename.bz2
- -d: decompress
- -k: keep original archive file (otherwise bzip2 deletes it after decompressing)
- -f: force-overwrite output file (otherwise bzip2 will complain about output file already existing)