to access the compact density option you have to manually enable it in about:config. while this does allow it to be used, it is not maintained. this means that new features (like the sidebar) do not cooperate. while it may not be a super commonly used feature not having it makes it very hard to make firefox appear native on any system. for example, here is a screenshot of my firefox nightly window right now:
I run kde plasma, and i have a transparent titlebar and border for aesthetic reasons. before, it would have been too bulky to use the titlebar because titlebar + hori. tab bar + address bar + bookmark toolbar is a significant amount of my vertical space. I attempted to compensate with the compact density setting, but I ended up using floorp insead. now that we have the vertical tabs and sidebar, I can save enough vertical space that even with the bookmark tab bar I can finally use the titlebar and have firefox look like it belongs on my system. without the compact option though, I would be forced to either let firefox look like it came from a different system or use something else. the former is bad because it looks terrible, and the latter doesn't really help because the only viable options that aren't affected by the same issue are chromium-based browsers.
there is also the issue of vertical space, because firefox's over-padded ui is being stacked on top of every website's over-padded ui. for example, here is a screenshot of the minimal phone website:
between the menu at the top of the page and the preorder thing at the bottom, i've already lost a significant portion of my screen to ui. add on the address bar, and its even more. thanks to the compact density it is bearable but this issue was big enough that it almost kept me from using firefox-based browsers at all.
Having this option be supported again would be very helpful in allowing users enough customization to make firefox look right on their system and maximize use of vertical space. please bring it back so users have more control over how much space is being used on their screen and what the app looks like on their system.