Making compact forms accessible. But why?

Mike Brittain in his ALA article talks about making compact forms accessible. Before reading his article I was not aware of a UI pattern of using 'compact forms' (pardon my ignorance) but apparently it is an oft used technique, which actually worries me a lot. I've seen forms where there are sample inputs provided and those too are something I believe is a bit of a nuisance. But in this case, the field label itself appears as the form field value. This must be mighty confusing to the user. Anybody has any experience designing these kinds of forms?