I'm not really an authority on this, but I've been able to use my spoiled rich friend's Waves C4 compressor, and it blows anything else I've ever used (not much) out of the water. It's not only a compressor, but also an expander, limiter, and a dynamic or standard EQ! It's like a software theme park!

Price tag: fou hundred dalla. Mucho dinero. viel geld. molti soldi. multa pecunia. Super Duper pricey.

BUT! If you have the money, this can basically color your sound any way you want. I could have sat there for days tweaking on this. It's fun-fun-fun in the sun!
Ask around though. There are definitely more affordable alternatives, which are much Much MUCH cheaper than outboard gear.

AaronP wrote: ....much Much MUCH cheaper than outboard gear.

Very true.

I wouldn't classify a $400 plug in as SUPER expensive. It should be a good plug-in for that price, but there are certainly some that are significantly more expensive (10x as much...check out algorithmix and Cedar stuff...though they don't make compressors...)

To answer the original question(s) -
Yes, digital/software/plug-in compressors can in fact color your sound equally or more than hardware plug-ins. Obviously, the way that they obtain this is significantly different than the way that hardware boxes do this.

Of course, in a lot of cases, what you want is clean/transparent compression. Several plug-ins do this quite nicely as well.

The Waves C4 is a pretty good plug in. I don't personally use it since I've been turned on to the units in the UAD card. Currently, I have about half of the compressor units available through UA and friggin love them. The Fairchild is about as heavy-handed as you can possibly imagine and is capable of gritting up the sound of a lead guitar or drum track as you can imagine. The Neve stuff is punchy and thick around the waist just like you'd expect from the real deals. The master bus compressor is smooth as a baby's hiney.

For vocals, I've been digging the 1176 and the LA2A and LA3A have been used on a lot of my jazz trumpet/sax/bass recordings.

In short, for the cost of one seriously good compressor (a la Crane Song or Manley), you could have a dozen that you could strap across 10 or so channels without choking the computer.

Do I still like hardware? HECK yes! Do I like the fact that it runs my control room up 10-15 degrees? Nope. Do I like having to replace tubes, get units re-capped, clean pots and switches or replace them? Nope.

I've made a significant shift away from hardware stuff to ITB stuff over the past 2 years. In fact, the only hardware devices that I own any more are front of chain devices (preamps, AD, DA, etc.) All of the money I had tied up in hardware went into new pairs of Schoeps...(God I love Schoeps - can't get enough of them!)