As a conversation approaches the context window ceiling, something has to give. Compaction replaces the older middle of the conversation with a summary, freeing room while keeping the thread.
It is genuinely useful and it is lossy in a specific way: the summary keeps what was said and loses the exact text. Details that were never restated (a precise error string, an exact path, a number) do not survive. Anything the rest of the session depends on verbatim should be written into a file or a standing instruction rather than trusted to survive a compaction.
The operational trap
Compaction takes time and produces no output while it runs. From outside, a session that is compacting looks exactly like a session that has hung: no tokens, no tool calls, nothing on screen.
Any supervisor with an inactivity timeout will therefore eventually kill a healthy session in the middle of compacting it, and it will do so preferentially to long sessions, which are the expensive ones you least want to lose. If a watchdog exists, compaction has to be a state it knows about, not an absence of activity it infers from.
Notice when it happens
A session that has compacted is not the same session, in the sense that matters: it now knows a summary of what it used to know precisely. That is worth being told about. Both to judge a strange answer afterwards, and because it is often the signal that the session should have been split into two.