I also had this problem but an update of compiz recently fixed the
problem.

Are you by any chance using the "ati" open source driver?  I found that
when this was happening and I ran compiz from the command line I got a
message saying something like "blacklisted driver 'ati' ".  This went
away after the latest updates.

** Changed in: compiz (Ubuntu)
Sourcepackagename: None => compiz

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gutsy compiz desktop effects could not be enabled
https://bugs.launchpad.net/bugs/139475
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