Ben

Today as I was driving home I engaged the AC and all appeared well. About 2 miles later the air out of the vent became warm and black/gray smoke started coming out from under the hood. After raising the hood, it appeared that the end of the AC compressor was melting!! Any clues/suggestion? 1990 944 S2 97K miles.

Martin

sounds like the compressor clutch has failed, either that or your compressor has ceased resulting in the clutch slipping and generation this heat. You can check the clutch separately by powering it with +12v from the battery to see if it clicks (with the engine off).
Also see if the compressor can be turned from the disengaged front pulley.