So PEEP: Reduces trauma to the alveoli. Improves oxygenation by 'recruiting' otherwise closed alveoli, thereby increasing the surface area for gas exchange. Increases the functional residual capacity- the reserve in the patients lungs between breaths which will also help improve oxygenation.

What does PEEP do to the lungs?

Applying PEEP increases alveolar pressure and alveolar volume. The increased lung volume increases the surface area by reopening and stabilizing collapsed or unstable alveoli. This splinting, or propping open, of the alveoli with positive pressure improves the ventilation-perfusion match, reducing the shunt effect.

Does PEEP improve ventilation?

Although PEEP improves oxygenation in diffuse lung disease, it can paradoxically worsen ventilation–perfusion ratios and gas exchange in patients with more focal processes.