The proprietary KZ format is almost certainly LZMA. Compare with 7zip 9.20 using default compression. Shown are size, compression and decompression time and memory used. Windows Task Manager also shows 75% CPU (1.5 of 2 cores on a 2 GHz T3200) for compression and around 35% for decompression for both programs. Both preserve timestamps of original files.
The license says that it uses WAV compression from WavPack and JPEG compression under GNU license by Przemyslaw Skibinski (I presume PAQ, but no source is included). I didn't test these.
227,905,645 enwik9.7z 1031s 42s 196MB 18MB
227,905,650 enwik9.kz 1061s 47s 197MB 19MB
Edit: I confirmed that enwik8.kz and enwik8.7z are identical except for a few bytes at the beginning and end.