Below are two examples of extreme spacing between words to demonstrate. Too much space in the first example causes the brain to pause between the words, leaving you wondering if they are connected. In the second example too little space leaves the brain trying to determine whether the text is one word or several.
When designing on screen, it's always a good idea to get up, take a step or two back from your desk and look at your monitor. Can you read it easily? Do your eyes pause? Do you get confused as to what line of text is next? If you find yourself pausing as you read, some tweaks in spacing may be in order.
Cathy Vandergeest, RGD