Compact jets are probably the most common form of jets in X-ray binaries and Active Galactic Nuclei. They seem to be present in all sources in the so-called hard X-ray spectral state. They are characterised by a nearly flat Spectral Energy Distribution (SED) extending from the radio to the infrared bands. This emission is usually interpreted as partially self absorbed synchrotron emission from relativistic leptons accelerated in the jet. The observed flat spectral shape requires energy dissipation and acceleration of particules over a wide range of distances along the jet. This distributed energy dissipation is likely to be powered by internal shocks caused by fluctuations of the outflow velocity. I will discuss such an internal shock model in the context of black hole X-ray binaries. I will show that internal shocks can produce the observed SEDs and also predict a strong, wavelength dependent, variability that resembles the observed one. The assumed velocity fluctuations of the jet must originate in the accretion flow. The model thus predicts a strong connection between the observable properties of the jet in the radio to IR bands, and the variability of the accretion flow as observed in X-rays. If the model is correct, this offers a unique possibility to probe the dynamics of the coupled accretion and ejection processes leading to the formation of compact jets.