IE8: Intranet Always in Compatibility Mode

I was having some odd problems with websites on my local intranet and eventually I traced it back to the sites being forced into IE7 Compatibility Mode for some odd reason. I could view the exact same page on a remote server and it would act as expected.

The culprit, was a little setting in the IE8 Tools menu called Compatibility View Settings, more specifically it was a checkbox in the resulting dialog labeled "Display local intranet sites in compibility view" that was automatically forcing every page on every server in my local intranet to automatically use compatibility mode without even displaying the broken page icon in the address bar.