Compositing was a hardware change, though. Modern GPU's (including GPU chipsets that are integrated as part of a CPU chip) basically accelerate 2D rendering by managing arbitrary surfaces as glorified sprites, which the hardware can "project" or "render" into other surfaces or on the screen in all sorts of ways, including occlusion, alpha blending, arbitrary 3D transforms etc. Hardware of the Win95 era didn't have anything like this; even moving and resizing windows only "animated" a wireframe rendition of the window, as with twm today.
Windows 95 was the first release to support dragging of full window contents. I think that hack was even supported in the Windows 95 tech preview for Windows NT 3.51.
But that was via BLT copy IIRC. Which is why there can be a slight delay filling the part of the screen being unobscured as the overlapped program repainted itself.
