I’m often heard saying that the recording engineer’s job is to create an environment conducive to musical creativity and then capture that creativity.
Headphones are usually the only way that a musician will be able to hear themselves and (more importantly) how what they are playing works with the rest of the band.
Every musician will (eventually) ask to hear themselves much louder than everyone else. This makes sense as it will allow them to play the nuances of their instrument.
However, if they are only listening to themselves (or the click track) and not the everything else then what they play may be wonderful by itself but terrible within the mix. They may even compromise the art of their own playing as a result of a poor headphone mix.
—Guitar players who hear themselves too loudly will not “bear down” with the pick as much as they may need to.
—Piano players who hear themselves too quietly may not play with the full dynamic range of the piano if they cannot hear themselves play softly.
—And finally, any musician that cannot hear the full rhythm will cause a combined pushing and pulling of all the instruments, and no one will be together or “in the pocket,” even if they are overdubbing alone.
Remember, you must make the musicians feel like they are playing together in a room without headphones (in fact I prefer to record bands that way). They have to be able to hear and feel each other clearly.
Sometimes you may have the luxury of multiple headphone feeds, which will allow you to tailor different mixes for the players that require them. Even given the advanced personal mixer technology available today, always be wary of letting musicians mix their own headphones completely by themselves, as they will tend to want to hear only themselves.