The main purpose of a loose cotton wheel is to polish and cut in a similar manner to the Spiral sewn wheel, except that this wheel, not being tightly stitched together, will 'mush' or collapse, allowing the cotton to get into awkward places more easily. If you have an object with fine details and awkward crevices, then this is the wheel to use.
Because you will be unable to exert pressure which slows down other harder wheels, you should consider putting LARGER loose cotton wheels on your buffer. This will increase the surface speed, improving the overall finish and the time involved.
For example, on a 1/4hp motor, @ 3450rpm, you can safely put up an 8" wheel x 1/4" thick. On a 1/3rd hp motor, 10" x 1/2" thick, on 1/2hp motor 8" x 1" thick.
3/4hp motor can carry several 12" wheels.
Use with any compound.