This is best illustrated by an example:
1. Imagine a laptop with intel video (for the sake of xrandr output names).
2. Start in single-head mode. Open some windows.
3. Plug in an external monitor.
4. Enable it with xrandr --output VGA --above LVDS
All existing windows stay in place. New empty desktop space appears on the external monitor.
Actual behavior (compiz 0.6.2+git20071119-0ubuntu1~gutsy1):
Your laptop panel becomes empty. All existing windows move to the external screen. This is quite disconcerting.
This also happens if you do xrandr --output VGA --left-of LVDS in step 4. You get the expected behavior only if you use --right-of or --below.
Aside: --left-of and --right-of are often not a practical option due to the 2048x2048 texture size limit shared by many drivers, unless both your screens happen to be 1024x768. And --below makes no little sense on a laptop.
This looks like it's related to 13317 and 12594.
Fixed in commit