I'm gonna throw-in here in a very opposite direction. I'm assuming that most of what the convo is referencing is compression pedals, such as the good ol' MXR Dynacomp. That's a great pedal for added sustain, and is a god-send for Metal players looking for extremely tight rhythm tone. Absolutely! However, let's take a more studio-oriented approach to dynamic compression, as opposed to saturation compression, for a moment.
Most pedal compressors are designed around saturation. What a saturation-oriented compressor does is gives that added sustain and fluid, creamy tone to a guitar sound,(especially useful for hot humbucking pickups). As stated by other posters, it also robs the overall sound of pick dynamics; which are crucial to many player's style. The reason being that, in many ways, it over-compensates for dynamics in favor of this type of tone. Especially if cranked-up to where you can really hear its' effect on the tone of an amp/guitar signal.
The true point of a compressor, in the dynamic sense, is to make everything level - regardless of frequency. In other words, for guitar purposes: The higher notes from the unwound strings are equally balanced, in output, from the lower wound strings. A dynamics compressor sets a volume ceiling, across the board, for all frequencies. In many ways, this is a type of compression that should be in the chain but NOT be heard,(anyone who has experienced volume drop-offs due to over-compressing the signal knows what I mean here). This is the type of compression I use in my rig via a dbx 266XL.
For my part, I designed my rig around my direct line,(guitar to rig to direct boxes - in stereo - to the house) acoustic guitar work many years ago. It has proven useful in my electric guitar sound as well but entirely because it was designed around dynamics instead of saturation,(creating an interesting hybrid rig that can truly enhance the guitar tone, overall, instead of being for any particular style or guitar type). I run the 266XL at a 2:1 compression ratio, with attack and release at about half-way. I DO NOT use the soft knee feature, as that very much tends to bleed over into the pick-attack-killing area as described previously.
In other words, I use my compressor very much the way it would be used in recording. I really wish more players would explore this style of compression, as opposed to using it to over-saturate their tone. It would take a lot of the "mystery" of compression out of the way for many folks. The key with compression, in my mind, is that it should make a difference in overall level without being heard.
