Comment by Sesse__

Some are bit-by-bit (e.g. the PPM family of compressors[1]), but the normal input granularity for most compressors is a byte. (There are even specialized ones that work on e.g. 32 bits at a time.)

[1] Many of the context models in a typical PPM compressor will be byte-by-byte, so even that isn't fully clear-cut.