Once you get past serve & receive, the basic rallying shot at the higher levels is counterlooping. Some do it from way off the table, others from close to the table (often taking the ball on the rise), while most take it somewhere in between, sometime after the top of the bounce (around table level), from five to eight feet back. It's mostly done on the forehand side, but some do it on the backhand side as well - especially the best players in the world, who often backhand counterloop off the bounce. (Spectators often don't even realize it's a counterloop as it happens so quickly, and think it's just a backhand block.) For this article, unless noted otherwise, I'm mostly talking about forehand counterlooping.
Not everyone needs to counterloop, not unless you are aspiring to the higher levels. If you have good serve & receive (and so can get the first attack in, forcing your opponent to either defend or go for a risky counterloop or some other difficult counter-attack) or have good defense (such as blocking or chopping), then counterlooping may be an unneeded luxury. But at the highest levels, essentially everyone counterloops. Blocking is often the last resort, as the best loopers overpower blockers with space-aged looping strokes and equipment. Even choppers almost always look for chances to counterloop.
At the recent USA Nationals I watched two rival junior players go at it. The previous time they'd played it had been rather close. This time the player I was coaching relentlessly counterlooped whenever the other player looped, turning the opponent into a blocker. The counter-looping player won easily. It wasn't a matter of just choosing to counterloop; the junior had been trained to do so with relentless counterlooping drills, and so when faced with aggressive loops, there was no hesitation; he counterlooped, and continued the barrage each point until the point was over.
Keys to a good counterloop include good technique (see a coach and watch the top players); light on feet (which is a habit you can develop); and good sponge. Even developing players should use modern sponges developed with looping in mind, with a slower blade until they are advanced. The paradigm used to be that developing players should use thinner and slower sponges to develop their strokes, and while I believe that was true before, I don't believe that is true any longer. Using such sponges simply limits the player from developing at a more advanced level. By using modern looping sponges, players find looping and counterlooping more natural, and so it becomes central to their games.
I'm not going to go into the finer points of looping or counterlooping technique here; see a coach for that. Instead, let's talk about what you can do to develop your counterloop.
First and foremost is the obvious: practice counterlooping. Find a partner or coach who can counterloop. Stand a bit off the table - perhaps five feet - and toss the ball up and loop it directly to your opponent's side of the table. This gets you right into counterlooping, forehand to forehand. Before you can do anything else, you must be proficient at this. One hint - don't try to meet the opponent's incoming topspin straight on. Instead, hook the ball by hitting a bit on the outside of the ball, creating a sidespin that breaks to your left and away from your opponent on his forehand side (for righties). This not only makes your counterloop more consistent, it gives you better angles, forcing your opponent to cover that much more table. If you watch world-class players, you'll see that they almost always counterloop with sidespin. Be aggressive in putting your own spin on the ball; overpower the incoming spin with your own spin, mostly topspin.
When you are pretty good at straight counterlooping, try the next variation: this time serve straight topspin (and have your partner do the same) so you can start by looping off a topspin ball from close to the table, and then back up and start counterlooping.
As you practice, you'll get a feel for what type of counterlooper you are - off-table, mid-distance, or close to table. Learn all three, but generally specialize in one. At the highest levels, players try to counterloop from as close to the table as possible, but at the speeds they play they are still forced to back up.
You can also get a coach or partner to feed you multiball, where the coach loops the ball directly after tossing the ball out of his hand. This allows him to move you around as you work on counterlooping and footwork.
Many players never practice anything beyond this type of straight counterlooping. But think about it - in a game, many or most loops start from backspin, which often have more topspin (because they are adding to the backspin already on the ball), come at you from a closer contact point (so you have less time to react), often have a sharper arc (due to the extra topspin), and force you to counterloop from relatively close to the table (since they don't usually bounce out as much as a loop against topspin). Plus you don't know where the ball is going, unlike in the counterlooping drills explained above, where you are going forehand to forehand. Here are some more advanced variations so you can get more match-like practice.
First, if you have a partner or coach feeding you multiball loops, have him vary the placement, so sometimes you forehand counterloop, other times you have to use your backhand. (Either block, hit, or counterloop. Or, if you are a chopper/looper, chop the backhand.)
Second, work on counterlooping against a loop against backspin. Have your partner serve backspin, you push long, and the server loops, and you counterloop, and both players continue to counterloop. (Or, if your partner isn't a counterlooper, he can switch to blocking after the first loop against backspin.) This gives you practice counterlooping against a loop against backspin. It also gives your partner practice looping against backspin.
But there is an even better way to rapidly develop your counterloop against a loop off backspin, using an adjusted version of multiball. Your partner will need a box of balls handy. Just as above, he serve and loops against backspin, and you counterloop. Only you do not play out the point. As soon as the server loops, he reaches for the next ball. So the server serve and loops over and over, and the receiver pushes and counterloops over and over. By doing this you can rapid-fire practice over and over your counterloop against a loop off backspin. And the server gets great rapid-fire practice looping against backspin!) As an added bonus, the receiver should work on his long push - don't make it easy for the server. Push quick off the bounce, heavy, low, deep, and well angled. (But for this drill, always push to the same spot.
You can also do this drill where the server loops to your backhand, and you can either backhand counterloop, hit, or block. You can also have the server alternate, looping one to the forehand, one to the backhand.
When you are proficient at this drill, there are two variations that will bring you to an even higher level. Now have the server serve & loop to one of two spots - either the forehand or backhand. (Or perhaps the wide forehand or wide backhand.) This forces you to make a quick reaction decision, just as you would in a match. Make sure your first move is the right one - don't anticipate, just respond to the ball coming off the opponent's racket, or a split second before if you see where it's going.
The final variation is to have the server loop anywhere on the table, including at your middle. When you are proficient at this, able to counterloop on the forehand, and counterloop, hit, or block on the backhand (depending on your style and the incoming ball), and able to cover the ball to the middle (forehand or backhand, depending on your style and foot speed), you will be ready to do this in a match. And then you'll be able to turn past rivals into blockers that you can overpower.
One last tip: No Guts, No Glory. If you don't use this shot regularly in matches (whether it's practice, league, or tournaments), then you won't develop the shot.