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The compensator is there to cushion the pulsating forces of the engine crankshaft rotating against the the drive train components. Without it, there would be increased vibration and a "jerky" feel, especially at low speed. Not a good thing. Also, the shock of the uncushoned pulses would tend to prematurely wear out components like the primary chain, gears, and bearings.
Basically it's a "shock absorber" for your drive train. It smooths out the transfer of power between your motor and transmission thereby easing the life of the components on both ends. It also allows your starter (more specifically the jackshaft that engages the ring gear in your primary) a little slack so it doesn't encounter the resistance of the motor right off the bat. This helps the jackshaft engage better. Also, if you're a bit ham handed with the clutch while going through the gears it makes you feel like a better rider than you really are, LOL!
In contrast if you run a dry clutch and a belt drive in your primary (instead of a chain) there is no compensator and in effect your motor and transmission are solidly connected to each other except for the minimal amount of "give" the actual belt may provide. And it's also the reason us guys running open belt drives have to pay a bit more attention to the style of starter jackshafts we use and how we install them.
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