Integrated Sensing and Communication (ISAC) in optical fiber systems necessitates balancing communication quality with sensing accuracy. This study proposes and investigates a Φ-OTDR ISAC system integrating Pulse Width Modulation (PWM) and Compressed Sensing (CS). We systematically evaluated the impact of varying pulse widths on the communication Bit Error Rate (BER) and sensing Spatial Resolution (SR), identifying 30 ns as the operating point of the system for balanced performance, at which the BER reached 2.089 × 10?3 and the SR was approximately 3m. To ensure sensing performance, CS was employed for signal denoising, enabling the successful recovery of 2 kHz and 5kHz vibrations with a Signal-to-Noise Ratio (SNR) peaking at 35.83 dB (stably >34dB), and notably, the PWM scheme had a minimal impact on the sensing SNR. This research provides quantitative insights for ISAC optimization and validates the effectiveness of the PWM-CS approach in enhancing the comprehensive performance of multi-functional optical fiber networks.