Real-world data often comes in compressed form. Analyzing compressed data directly (without decompressing it) can save space and time by orders of magnitude. In this work, we focus on fundamental sequence comparison problems and try to quantify the gain in time complexity when the underlying data is highly compressible. We consider grammar compression, which unifies many practically relevant compression schemes. For two strings of total length $N$ and total compressed size $n$, it is known that the edit distance and a longest common subsequence (LCS) can be computed exactly in time $\tilde{O}(nN)$, as opposed to $O(N^2)$ for the uncompressed setting. Many applications need to align multiple sequences simultaneously, and the fastest known exact algorithms for median edit distance and LCS of $k$ strings run in $O(N^k)$ time. This naturally raises the question of whether compression can help to reduce the running time significantly for $k \geq 3$, perhaps to $O(N^{k/2}n^{k/2})$ or $O(Nn^{k-1})$. Unfortunately, we show lower bounds that rule out any improvement beyond $Ω(N^{k-1}n)$ time for any of these problems assuming the Strong Exponential Time Hypothesis. At the same time, we show that approximation and compression together can be surprisingly effective. We develop an $\tilde{O}(N^{k/2}n^{k/2})$-time FPTAS for the median edit distance of $k$ sequences. In comparison, no $O(N^{k-Ω(1)})$-time PTAS is known for the median edit distance problem in the uncompressed setting. For two strings, we get an $\tilde{O}(N^{2/3}n^{4/3})$-time FPTAS for both edit distance and LCS. In contrast, for uncompressed strings, there is not even a subquadratic algorithm for LCS that has less than a polynomial gap in the approximation factor. Building on the insight from our approximation algorithms, we also obtain results for many distance measures including the edit, Hamming, and shift distances.