Compress data before storage on Google App Engine
"Compressing before upload" implies doing it in the user's browser -- but no text in your question addresses that!  It seems to be about compression in your GAE app, where of course the data will only be after the upload.  You could do it with a Firefox extension (or other browsers' equivalents), if you can develop those and convince your users to install them, but that has nothing much to do with GAE!-)  Not to mention that, as @RageZ's comment mentions, MP3 is, essentially, already compressed, so there's little or nothing to gain (though maybe you could, again with a browser extension for the user, reduce the MP3's bit rate and thus the file's dimension, that could impact the audio quality, depending on your intended use for those audio files).
So, overall, I have to second @jldupont's suggestion (also in a comment) -- use a different server for storage of large files (S3, Amazon's offering, is surely a possibility though not the only one).
I im trying to store 30 second user mp3 recordings as Blobs in my app engine data store. However, in order to enable this feature (App Engine has a 1MB limit per upload) and to keep the costs down I would like to compress the file before upload and decompress the file every time it is requested.  How would you suggest I accomplish this (It can happen in the background by the way via a task queue but an efficient solution is always good)
Based on my own tests and research - I see two possible approaches to accomplish this

Zlib 

For this I need to compress a certain number of blocks at a time using a While loop.  However, App Engine doesnt allow you to write to the file system. I thought about using a Temporary File to accomplish this but I havent had luck with this approach when trying to decompress the content from a Temporary File

Gzip 

From reading around the web, it appears that the app engine url fetch function requests content gzipped already and then decompresses it.  Is there a way to stop the function from decompressing the content so that I can just put it in the datastore in gzipped format and then decompress it when I need to play it back to a user on demand?
Let me know how you would suggest using zlib or gzip or some other solution to accmoplish this.  Thanks