Like so many questions, its looking for a black and white answer when there's not one.
I think there's four major "types" of things that are often shouted "POLITICAL CORRECTNESS" now a days.
The first are honest attempts to be less "insulting". Think of no longer calling Deaf and Mute people "Deaf and Dumb". Or even not calling a person with Downs Syndrome "A retard". Some of these things are absolutely good things in my opinion, attempts to change the general social view of things as more information is gained. Others can go a bit too far, such as the push for "handicapabable" at one point instead of "handicapped", where its attempting to push something for a "rah rah" type reason more than anything else. You also have some that are attempted to be used to spare feelings but frankly are rather pointless such as "african-american" and "caucasion" instead of "black" and "white". It can also be a bit counter productive. Take for example deaf aboved and trying to go "hearing impaired". Deaf is easy to understand, deaf means they can't hear. Hearing impaired could mean they don't hear well? They hear only out of one ear? They're completely deaf? What? It creates confusion out of nothing but a social desire to really, really not offend.
The second are done generally for political reasons. These are things like referring to Illegal Aliens as "undocumented workers", terming people like blackwater "Private Security Forces" rather than "mercanaries". These are things where people change the terminology in hopes of changing the image of the thing being talked about to be more favorable/negative depending on their intent. These generally don't greatly bother me either way, except in cases where the people using it are so deluded to believe that the term they're using is some kind of absolute truth rather than political spin.
The third are done for social reasons. These are what many people likely think about with regards to this. Can go from not talking about or mentioning a stereotype of a group, or suggesting something was just "wrong" to say, and other such social interactions. These type of things are really situational, often going from way overboard to understandable.
You also generally have hybrids of those. Two big ones in recent memories were actually from the right, with "Freedom Fries" instead of "French Fries" and condemnation towards the Dixie Chicks for suggesting negative things about the president during a time of war...so much so that some labeled it "treasonous". That'd be an example of a Social thing. Where as something like the attempts to not recognize christmas happening in stores or various places could be viewed as a mix of the one concerning feelings and social, going so overboard to be "sensitive" and respect other cultures.
The fourth type in my mind isn't political correctness, but often gets lumped in with it. And that's simply being tactful. Some people have become so ingrained against Political Correctness that they go over board, to the point of feeling like anything should be said at any time for whatever reason. This notion of it being fine to have no tact, no class, and be offensive and then to defend it by accusing someone of trying to be "political correct". This is one version of it I dislike, as I think too often we've had an honest lack of tact in our society.
Political Correctness also suffers the same thing as any movement, be it the feminist movement, the civil rights movement, or even what will befall the tea party movement if it continues on. And that is the notion that you reach a point of acceptability where the idea you are pushing is worth while, legitimate, and implimented well and you're stuck with two options...
Cease the push you've been making and the cause you've been striving for and embrace the change you've created, or adapt your cause, change it, and continue the push. "Lets stop calling people in the country illegally wetbacks" happens giving us illegal aliens and then pushing for undocumented immigrants could be an example of this. While there have been some worth while and good changes to our culture and vocabulary based on political correctness, the majority of those changes are now rooted in and rather than letting the push go they move onto other things that don't need it or where its being done simply for the sake of being done.
So all in all, I guess I typed a lot to give a none answer. Political Correctness, as a concept, is not in and of itself a bad thing. It can absolutely be bad, and I'd wager slightly more often then not it is, but it can also be good. Its also sometimes applied to things where it just doesn't fit and is really simply being respectful/tactful.
The one difference I would say is with regards to government forcing individuals to participate in political correctness through law, which generally I would say would be a bad thing.