It depends on the individual client's needs and the boundaries of the therapist, as well as the therapist's theoretical orientation. From an experiential, feminist or trauma therapy perspective it can be very appropriate. From a classical psychoanalytic perspective, it can be very problematic.
When I am working with clients with a history of child abuse or neglect, they cannot trust me if they can't read my positive intentions. Earlier in my career when I tried to remain a blank slate, clients with complex childhood relational trauma histories would commonly experience traumatic transference, projecting their expectation of betrayal onto me, and would sometimes be unable to get past seeing me as an abuser. Now I am much more transparent about my emotional reactions to my clients. This type of disclosure helps clients with impaired trust to distinguish between the intent of my behavior and that of their abusers.
On the other hand, clients without impaired trust could very well feel burdened by unnecessary therapist disclosure. I have made this mistake as well. It is very important that we monitor our own countertransference reactions to guard against inappropriate self-disclosure and make sure that disclosure is only intended to meet the therapeutic needs of the client.
A good resource is: Zur, O. (2010). Self-Disclosure & Transparency in Psychotherapy and Counseling: To Disclose or Not to Disclose, This is the Question. Retrieved July 3, 2011 from http://www.zurinstitute.com/selfdisclosure1.html
What do you think about therapist disclosure? Is it ever appropriate? Under what circumstances?