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I know what Desktop Composition is. But what exactly does it mean in the context of Remote Desktop? How does it change the way data is sent, and how much is sent, over the wire?

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This blurb from the Desktop Virtualization Team at Microsoft should help:

Remote Desktop Protocol was extended to support Desktop Composition remoting (or, composed mode RDP). This is achieved by transmitting composition commands from DWM on the server to the RDC client. The client interprets these commands and renders the desktop. The composition commands lead to increased bandwidth consumption. Desktop Composition remoting is only available from Windows Vista to Windows Vista.

See http://download.microsoft.com/download/4/d/9/4d9ae285-3431-4335-a86e-969e7a146d1b/RDP_Performance_WhitePaper.docx for more details.

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