FabFilter Pro-C 2 Help
The dynamics algorithms often need to make very quick changes to the audio when applying gain change. These sudden changes can introduce a small amount of aliasing, which causes distortion and generally reduces the quality of the audio signal. Oversampling is a way to reduce that aliasing by running the internal process at a sample rate that is two or four times higher than the host's sample rate.
You need it more when the compression is more aggressive and apparent. Usually, this is the case when using lower Attack and Release and/or higher Ratio and Range settings.
Of course, in return for a reduction of possible aliasing/distortion, the plug-in will use more CPU power when using oversampling. In addition, oversampling introduces a small latency, in addition to lookahead latency.