Thompson was born in the Notting Hill neighbourhood of London on April 3, 1949. His father, a transplanted Scotsman, was a Scotland Yard detective and an amateur guitar player whose musical tastes would greatly influence the young guitarist. He enjoyed listening to everything from classic jazz and bebop to Scottish folk music. All these musical genres eventually made their way into the diverse blend forming, in the years to come, Thompson's distinctive playing style that is impossible to define. It is enough to listen to some of his solo tracks from the album Shoot Out the Lights or any of his standout electric performances to hear and appreciate it. Although he was raised on rock ’n’ roll, both his style and riffs, especially his hybrid picking style (using a pick between thumb and index finger and the bare tips of the middle and ring fingers) and his frequent use of open tunings, have leaned more toward a clean eclecticism than toward the heavy, humbucker-fueled blues-rock typical of so many players active in the late 1960s. The American producer Joe Boyd said bout Thompson: "He can imitate almost any style, and often does, but is instantly identifiable. In his playing, you can hear the evocation of the Scottish piper's drone and the melody of the chanter as well as echoes of Barney Kessel's and James Burton's guitars and Jerry Lee Lewis's piano. But no blues clichés". Indeed, much of Thompson’s unique style and tone seems to borrow from the fingerstyle acoustic Scottish and English folk music to the electrified genre, but his roots are very much in rock ’n’ roll.
In 1967, at the age of 18, Thompson co-founded the band Fairport Convention and remained with them until 1971. During those years, Thompson acquired a reputation as an outstanding guitarist and songwriter. Thompson was playing a mid-’60s Stratocaster, then he bought what would have become his favourite Strat in 1971, around the time of his departure from the band. The first solo album that he recorded with it, Henry the Human Fly, was considered both a commercial and critical failure. However, that Stratocaster came eventually into its own on 1982’s Shoot Out the Lights, declared by Rolling Stone mag one of the best rock albums of all time, recorded while he was performing as a duo with his then-wife Linda Thompson. They produced together six albums, including I Want to See the Bright Lights Tonight (1974) which was also critically acclaimed. After the dissolution of the duo, Thompson started a proficuous solo career during which he released eighteen albums, three of which were nominated for Grammy Awards and one, Still (2015), enter the UK Top Ten album.
Thompson has also used alternative designs from smaller guitar makers throughout his career, but he will be always considered “a Strat player” first and foremost. In the latter part of his career, he has frequently used electric guitars made by California builder Danny Ferrington, which often comprise clever twists on some of the basic Stratocaster specs. However, he has often returned to his ’59 Strat, which was played so heavily in its first ten years of ownership that the original neck with rosewood fingerboard would no longer take a refret and had to be substituted by an all-maple neck from 1955. Thompson also plays a reissue-style Fender Stratocaster in Sonic Blue that his guitar tech, Bobby Eichorn, assembled from select pieces of different Fender guitars.