Exposure Compensation

Exposure Compensation increases or decreases light. However, why is it necessary
if the ISO could be in/decreased and with all the shooting modes such as beach, action,
night etc.?
In beach mode, the light is decreased as well. In action mode, shutter speed is faster.
I've noticed if the Exp. Comp. is set to -2, and the flash is off, there is less blur, but the photo is much darker. Thus, more light is needed as the aperture is decreased and the shutter speed is increased, correct?
So when it's dark, how is that different from setting the ISO to 400, using flash, or decreasing the shutter speed?
And when it's too bright choosing the lowest ISO, and increasing the shutter speed?

Romphotog-
The reason is noise. Did you ever shoot fast film? You might have noticed that ISO 400 and faster film had larger and more noticeable grain. The same is true when you increase the ISO on a digital camera. While it's possible to change the exposure by adjusting the ISO, a higher ISO will always increase digital noise and degrade the quality of your image. Exposure compensation will work within your chosen ISO, adjusting exposure with either the shutter speed or aperture. That way you can choose your ISO based on light conditions and desired image quality. If you find that your images are still too dark or you have motion blur, then consider increasing the ISO. Otherwise, it's best to always shoot at the lowest ISO your camera offers.

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Originally Posted by Romphotog

Exposure Compensation increases or decreases light. However, why is it necessary

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I agree with John, but to answer this part of it:

In-camera light meters are set to give accurate results in "average" scenes and "average" light conditions. If you're shooting around a lot of show (or what you're shooting has a lot of white in it), you'll end up with an underexposed shot because the camera is trying to turn it into an "average" color so it ends up grey. Same with black - it will overexpose it and turn it grey too. Very light colors will be darker; dark colors will be lighter.

Even the latest/greatest in-camera metering systems aren't flawless, but it will take a fair amount of snow in the frame (for example) to confuse the meter - just a little bit at the bottom of your shot shouldn't do it (again, for example). When you do have mostly snow, then you'll use exposure compensation to put in somewhere between +1 and +2 to keep the snow white (or whatever color the way you see it). Takes practice to know what you're looking at and how to set the camera for it, but this is the basis for Ansel Adams' Zone System. It works! :)