The object of the hyphen in the compound modifier should normally be clarification.
Adjectives in a compound modifier sometimes precede two nouns. In the phrase small-jet engine, the hyphen tells us the engine isn’t small for a jet, but the jet itself is probably one of those bijou executive models. Adjectives can also describe other adjectives, as in eerie-blue eyes, where the hyphen tells us the eyes were an eerie-blue shade.
The compound modifier is handy because it can be a briefer, more direct way of describing something. Eyes that were an eerie blue gain immediacy by calling them eerie-blue eyes.
But does that mean you should jump on every pair of adjectives following a noun and manacle them together in front of the noun?
She wore a gown of silver and blue.
That sentence isn’t equal to:
She wore a silver-blue gown.
The conjunction in silver and blue is your tip-off. It means the adjectives have equal weight, so the gown could be, say, blue with silver trim, not a distinct silver-blue shade. Before a noun, they should be separated either by a comma or a conjunction.
So how do you know when two adjectives have equal weight?
There’s a simple test. When you write a phrase like little red wagon, you can be fairly certain that red can’t be described as little; it’s the wagon that’s on the small side. No hyphen is needed. So they’re separate (but not equal) adjectives. Red has been given greater weight than little by its proximity to the noun and the absence of a comma or conjunction. If the two adjectives had equal weight, long-standing convention would suggest a comma or conjunction.
The quick test for equal weight is to ask yourself: “Would I ever say the little and red wagon?” I think the great majority of native English speakers would say no. (This is a question that can’t really be answered by a rule from on high. It comes under Noam Chomsky’s heading of “deep” grammar — something you just know because it’s your language. *) So little red wagon requires neither a hyphen nor a comma.
Although the weight given to the two adjectives, and the choice between comma and conjunction, is a question of emphasis (and therefore discretionary), the principle of equal weight makes it clear that the silver and blue are discrete entities, each describing the gown in its own way.
As someone who has spent a lifetime looking at how sentences work, I think the rush to hyphenate every descriptive phrase that precedes a noun illustrates the absolutism that seems to plague the subject of usage. You needn’t review the tortuous explanation I just gave every time you decide whether or not to hyphenate (although you can consult a fine, long list in The Chicago Manual of Style if you’re worried). Basically, a writer should ask himself or herself what the sentence actually means and whether readers will be able to understand it. When these questions have a clear answer, the sensible use of orthographic marks (hyphens, apostrophes and such) often becomes clear.
*An example of deep grammar is that you might tie a yellow ribbon ’round the old oak tree, but you’d find it really odd to tie a yellow ribbon ’round the oak old tree. And no one has yet formulated a convincing rule that tells us why this should be so. If there were an answer, it would stray well into philosophical arguments like the primary and secondary qualities of objects. Aargh!