If you do not have a dial test indicator, a set of digital calipers will do the job.
With Backlash compensation OFF :-
Start with your mill at 0,0: On the MDI type G0X1 and measure the position of the table (or cutter, whichever moves) from some suitable point in line with the axis. Zero your calipers. If you then type G0X2, followed by G0X1, in theory the table will have returned to where it started and your calipers should read 00 again. (If you want to be really accurate do a G1 with a slow feedrate F4 say)
They will not, and the amount on the calipers is your backlash. This is the movement lost by the axis as the gearing is getting itself into the right position to shove the other way. On a circle (depending on where you start) each axis changes direction once, and sometimes twice, so the flat bit you get on the circle is say the Xaxis changing direction (and not moving for a short time) whilest the Y axis carries on regardless.
Enter this amount in the backlash compensation table, repeat for the other axis, and turn on the compensation.
The way Mach 3 applies compensation is a little disconcerting (although the speed of it can be adjusted) but it is accurate.