Can also handy for debugging, to quickly show a bunch of variables and their values:

<?php
print_r(compact(explode(' ', 'count acw cols coldepth')));
?>

gives

Array
(
    [count] => 70
    [acw] => 9
    [cols] => 7
    [coldepth] => 10
)

Consider these two examples. The first as used in the manual, and  the second a slight variation of it.

Example #1

<?php
$city  = "San Francisco";
$state = "CA";
$event = "SIGGRAPH";

$location_vars = array("city", "state");

$result = compact("event", $location_vars);
print_r($result);
?>

Example #1 above  will output:

Array
(
    [event] => SIGGRAPH
    [city] => San Francisco
    [state] => CA
)

Example #2

<?php
$city  = "San Francisco";
$state = "CA";
$event = "SIGGRAPH";

$location_vars = array("city", "state");

$result = compact("event", "location_vars");
print_r($result);
?>

Example #2 above will output:

Array
(
    [event] => SIGGRAPH

    [location_vars] => Array
        (
            [0] => city
            [1] => state
        )

)

In the first example, the value of the variable $location_values (which is an array containing city, and state) is passed to compact().

In the second example, the name of the variable $location_vars  (i.e  without the '$' sign) is passed to compact() as a string. I hope this further clarifies the points made in the manual?

So compact('var1', 'var2') is the same as saying array('var1' => $var1, 'var2' => $var2) as long as $var1 and $var2 are set.

If you must utilise this knowing that a variable may be unset, then you need to use an alternative method.

So instead of the following:

<?php
$var1 = "lorem";
$var2 = "ipsum";
$result = compact('var1', 'var2', 'unsetvar');
?>

Consider the following:

<?php
$var1 = "lorem";
$var2 = "ipsum";
$result = [];
foreach( ['var1', 'var2', 'unsetvar'] as $attr ) {
    if ( isset( $$attr ) ) {
        $result[ $attr ] = $$attr;
    }
}
?>

The description says that compact is the opposite of extract() but it is important to understand that it does not completely reverse extract().  In particluar compact() does not unset() the argument variables given to it (and that extract() may have created).  If you want the individual variables to be unset after they are combined into an array then you have to do that yourself.

If you want to collect all of the variables defined in the current scope into an array, use get_defined_vars().  It works similar to compact(), but doesn't require a list of variables to be passed.