what are the steps to install magento module/extension, what is the state of compiler? on or off and is compiler should be on after module/ extension installation ?

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Generally, you would :

  1. Turn off compilation
  2. Back up files (optional)
  3. Back up database if it will be affected (optional)
  4. Turn on the cache
  5. Upload extension files per extension developer's instructions.
  6. Refresh the cache
  7. Log out, then log in.
  8. Re-enable compilation if you are using it.

That should take care of the installation.

There is a free, comprehensive guide here that has more information : http://store.fooman.co.nz/ultimate-magento-extension-guide

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