The Linux 3.11 kernel adds in support for compressing the Linux kernel with LZ4 as it's been found that its compression/decompression speeds can exceed that of LZO, Snappy, Zlib, and other compression algorithms. In particular, LZ4 for Linux has caught the interest of ARM/embedded Linux developers as the LZ4 Linux kernel image speeds exceed that of LZO.
With LZ4 compression support now found within the mainline kernel, Phillip Lougher has proposed patches for SquashFS to utilize the code, which amount to less than 200 lines of new code for the read-only compressed Linux file-system. On the user-space side for squashfs-tools, he's also added LZ4 support into his Git repository.
The LZ4 SquashFS code can be found for now on the Linux kernel mailing list, but it's not clear at the moment whether the code will be accepted upstream. Some developers aren't sure whether LZ4 will offer any real (performance) benefits for LZ4 SquashFS, to which Lougher responds, "I believe it is important to give people the choice of using LZ4 to compress Squashfs filesystems now its been mainlined. As far as expected benefits are concerned, Squashfs' use in embedded systems is very similar to compressing kernels and initramfs data, in that it tends to be used to compress root filesystems. As such the benefits of using LZ4 in Squashfs should be broadly similar to using LZ4 to compress kernels and initramfs data. Ultimately it is up to people to experiment and choose whatever compression is best for their systems."
On a semi-related note, LZ4 for Btrfs was similarly proposed in the past (pre-3.11) but its patches were not merged into mainline with Btrfs for now allowing LZO and Zlib compression options.