Paint compatibility entails your paints ability to actually adhere to older coats of alkyd or oil-based paint. When you're trying to use a water-based latex paint to paint over more than three or four coats of old alkyd or oil-based paint, the adhesion can prove to be minimal, which causes flaking and "lift off." Rob Hooft, a structural chemist with a Ph.D. in molecular modeling and X-ray diffraction sums it up best.
There are two steps in the process: First, the wet paint must stick to the wall, then it dries.
The sticking is caused by adhesion. This effect is caused by molecules in the wall and in the paint like the fact that they are together. Adhesion is very general in liquids (it causes you to get wet in the rain) and there are only rare cases of molecules that prevent sticking (these are used in anti-stick coatings of e.g. frying pans).
Secondly, after the adhesion, the paint dries. This is often a process whereby a liquid evaporates and air changes a binder in the paint to bind its molecules together. Now the paint layer becomes very strongly tied together and resistant.
Since walls are porous, the liquid paint will actually partly go into the wall. This helps also to make the dried paint become strongly attached. If you have a very hard surface, sometimes the dry paint layer can be scratched off because the paint attaches very strongly to itself, but much less strongly to the covered surface."'
With those elements in mind, paint compatibility is very important when attempting to paint over or repaint an object. The best solution is to completely remove the existing layer of paint, but falling short of that, repainting using another coat of alkyd or oil-based paint is the best solution. Cleaning, sanding, and spot-priming are always good precautionary steps before repainting with top quality latex exterior paint.