I agree with your friends. Grocery store type tea bags have the tea leaves broken down and compacted for convenience. But I think the flavor is partially lost once the leaves are chopped.
I prefer loose tea because you can adjust the strength by adding more leaves to suit your taste. Plus, I enjoy mixing different leaves to come up with new flavors; something not permissable with tea bags.
I have read that once the tea leaves are broken up into tiny pieces and put into bags by grocery store type companies that it looses essential oils and natural chemicals which make tea a great antioxidant. Whereas, gourmet tea companies when bagging tea do not break up the tea leaves near as small; thus the flavor and nutrition is closer to loose tea.
To add to the other comments, tea leaves need the space to unfurl, or expand, while steeping. When the ground leaves are commercially bagged some of the essential oils are removed. Then, the space of the bag further limits expansion of the leaves thus, preventing what little flavor is left from being completely released. I agree with Carolyn that gourmet tea companies take more care with their leaves and bagging for this reason.
Many grocery store sold tea bags are bleached which can permit the chemicals of the bleach to impact the flavor. Also, teas in tins last up to two years whereas bulk cardboard-packaged tea bags lose freshness if not wrapped individually.
