It's written as an homage to The Screwtape Letters in which a senior demon, Screwtape, writes letters to a lesser demon, Wormwood. It's about leading someone to sin.

The argument put forth, couched in enough conceits that if you aren't already halfway up your own navel you'll never find it, is that "feeling" empathy can prevent people from "doing" compassion. If you remove the conceit it gets clearer:

As in many things, we must always keep in mind the Enemy’s goals and ours. The Enemy aims to produce a fellowship of sufferings, with his Accursed Son at the center of it. But fellowship requires fellows; that is, it requires distinctness. Fellows say, “We are together, and yet I am still I and you are still you.” This is a kind of union, where one thing is united to another thing while still being itself.

God aims to produce a fellowship of sufferings with Jesus at the center of it. Fellowship requires fellows; it requires distinctness. Fellows say "we are together yet individual." This is a union where people are united but still distinct.

In fact, if the Enemy is to be believed, creatures become more themselves when thus united. Of course, it is all lies, and in stoking empathy we are simply cutting with the grain of reality. Empathy goes beyond union to the more potent and dynamic truth of fusion, the melting together of persons so that one personality is lost in the other. Empathy demands, “Feel what I feel. In fact, lose yourself in my feelings.”

In fact, humans become more themselves when united. The devil would rather stoke empathy than compassion because instead of union it creates fusion, where people are no longer distinct.

Which is fucking nonsense. But this is the way seminarians often argue - take a nonsense assertion, put it on the lips of the devil and use it to make a different nonsense assertion look sensible.