The RECOMPILE query hint is a more granular way to force recompilation in a stored procedure to be at the statement level rather than using the WITH RECOMPILE option, which forces the whole stored procedure to be recompiled.
When the Query Optimizer sees the RECOMPILE query hint, it forces a new query plan to be created regardless of what plans may already be cached. The new plan is created with the parameters within the current execution context.
This is a very useful option if you know that a particular part of a stored procedure has very different input parameters that can affect the resulting query plan dramatically. Using this option may incur a small cost for the compilation needed on every execution, but if that’s a small percentage of the resulting query’s execution time, it’s a worthwhile cost to pay to ensure that every execution of the query gets the most optimal plan.
For cases in which the additional compilation cost is high relative to the cost of the worst execution, using this query hint would be detrimental to performance.
Before using any query hints, run a web search for the latest information on issues with query hints. Try searching on the keywords “SQL Server Query Hints” and look specifically for anything by Craig Freedman, who has written several great blog entries on some of the issues you can encounter when using query hints.