i dont use compression on bass guitar, but i do use it on treble guitar...
my gf has a emg-81 in the bridge position only, its twangy as hell. using a durham sexdrive with the comp at low smooths out the highs a bit, which normally are louder (or at least more noticeable) than the other frequencies generated by the guitar. so in this case, yes, a comp is very, very handy. makes her guitar sound a lot better...
my bass is kinda twangy too, but i don't want to attenuate the loudness of my clickitty clack, so i don't compress. i do tone shape though with a submarine, to even out the frequencies a bit, and often, to accentuate.
i would like to try a 'good' comp someday, just to know for sure. for now, i just use the comp on my amp (sometimes) as a limiter to protect the speakers from volume spikes, but thats rare.
cheers if compression works for you... but saying its 'essential' if you want to sound good live is a bit presumptuous. just as presumptuous to say that using compression is a crutch to sloppy playing, which happily, no-one here has yet to say. different strokes for different folks and all that...
compression in the studio is a whole 'nother thing.