Editing a Compressed File (Sound) (Is it damaging to do so?)

OK, so that article is about “data compression” (making the file size smaller).
Lossy formats such as MP3, AC3, WMA and so on, always reduce the sound quality a bit when the audio is encoded.

Audacity always works with “uncompressed” audio. That means, to edit an MP3 (or other compressed format) and end up with an MP3, the original MP3 is “decoded” to give uncompressed data, then on export it is re-encoded. That (re-)encoding will cause some sound quality to be lost - it’s similar to making a photocopy of a photocopy - do it enough times and you end up with a page of grey smudge.

There are some programs that can do basic editing (like trimming the length of a track) without decoding, so there is then no need to re-encode. Thus these programs are able to retain all of the quality of the original MP3. These programs can only perform “basic” editing. Advanced processing (as can be done in Audacity) is not possible without decoding the audio data. Examples of “lossless” MP3 editing programs are MP3Split and mp3DirectCut