RADEON_HYPERZ = 1
Edit: first make sure you have the latest git code, as there are known bugs otherwise.
set the env var RADEON_HYPERZ and run piglit with parameters: -c 0
r500 hardware defaults on, r300/r400 need the environment variable set.
To double check it's on, watch stdout of the GL application for "radeon: Acquired Hyper-Z." And apparently the hardware only supports 1 app at a time with HyperZ, so make sure you aren't running more than 1. (compositors for desktop graphics are blacklisted).