Yeah, basically compressing in an XZ stream using LZMA2. The parameters are tuned for the kind of data and network patterns VNC uses.
More CPU and RAM but much better compression. This works well for me since bandwidth is usually the limiting factor rather than server resources.
I'll probably have some volunteers help test and tune things before making anything official yet. I have been working on this for several months, but only this weekend found enough time to put together everything and see it in action.