Gonna reply to myself in case someone looks for this in the future. I just ran a test piece and measured the size with and without cutter compensation. On an outside contour, setting the tool diameter to -.3mm resulted in a an outside contour that was .3mm smaller across, so the -.3mm must be cutter diameter. Makes sense.
Some of my confusion came from the docs here where there are changes between radius and diameter sentence by sentence.
linuxcnc.org/docs/html/gcode/tool-compensation.html
"4. Cutter Radius Compensation
Cutter Compensation allows the programmer to program the tool path without knowing the exact tool diameter. The only caveat is the programmer must program the lead in move to be at least as long as the largest tool radius that might be used."
For PathPilot at least, it appears to be diameter.