One thing that always stands out from years of coaching is that those who play in tournaments regularly almost always improve faster than those who do not. There are players who train and train, but do not get the constant feedback you get from playing in tournaments, and so the training doesn't always transfer into improvement. Also, players who do not play tournaments regularly are not "tournament tough," and so do not play as well as players who compete in tournaments regularly. (Note - when I talk about playing in tournaments, this includes league matches as well, as long as you are playing a lot of different players there.)
Why is it so important to compete regularly, as opposed to just constant training? The constant training improves your game, but you also need the constant competition to learn to compete against different players, for feedback on your game, and to become mentally stronger under pressure situations. It also gives you incentive to practice.
Some would argue that you get the same thing by playing practice matches against players at your club. While this is partially true, there are two problems here. First, you are playing the same players over and over. You get used to their serves, their receives, and their rallying shots. Then you go to a tournament, and find that everybody has different serves, receives, and rallying shots. You'll never face everything, and even if you did, you'll never get used to everything. But what playing different players regularly does is develop the habit of adjusting to new players. A player who plays lots of tournaments will adjust far more quickly to a new serve or other shot than a player who only plays the same players, and so isn't used to adapting to new things. The constant feedback from playing different players also shows a player what he needs to practice.
The psychological aspect might be even more important. Playing a practice match at the club just isn't the same as playing under pressure at a tournament, where the results count. To many, just the thought of blowing rating points can turn ingrained techniques into shivering jellyfish!
A third aspect is the competitive aspect, as in players who compete have stronger incentive when they train. A player who competes constantly knows what works and what doesn't work in serious competition, and so has incentive to turn the strengths into overpowering ones, and to work on weaknesses that are exposed in tournaments. Knowing you have another tournament coming up gives them a timely reason to train to excel, while those who don't have anything coming up have more of a mental battle to push themselves to excel.
You might want to take time off from tournaments for a time when you are working on something new that is central to your game. Competing when your game is in transition is often a mistake, and can lead to falling back on old habits you are trying to overcome. For example, if you were mostly a hitter but are trying to incorporate more looping into your game, you might want to focus on training until you feel your looping is ready - but once you reach that stage, where you can confidently loop in a real match, then you should get back to constant competition.
Think of tournaments and practice as the Yin and Yang of table tennis. They feed off each other, and one without the other is like a Yinless Yang or a Yangless Yin. Go for both, where you practice for tournaments, and use tournaments as feedback and incentive for practice, and watch your game soar.