A compressor is in effect, an automatic fader. When the input signal exeeds a predetermined level
(Fig. 1), called the "threshold", compressor gain is reduced & the signal is attenuated. The increase
of input signal (in "db" or decibles) needed to cause a 1-db increase in the output of the compressor
is called the "Compression Ratio"
Thus, for a ratio of 4:1 (4 to 1), an 8-db increase of input produces a 2-db increase in the output.
Since the signals generated in music vary in loudness & therefore, maybe above the threshold at one
instant & below it in the next, the speed with which the gain is to be reduced (gain reduction), after the
signal exeeds the threshold, & then restored, after the input signal falls below the threshold, must
be determined.
These speeds are determined by the "Attack" & "Release" times. The attack time is defined as the time it
takes for the gain to decrease by a certain amount, usually to 63% of its final value. The release time is
defined as the time required for the gain to return to its original level, usually 63% of its original value

On most compressors the threshold is also adjustable, which can also leave you scratching your head!!!
Most compressors have 2 rows of LEDs, 1 going one way to show the output signal & 1 going the other
way to show how much gain reduction there is.
So what I do is, watch the meters on the compressor while the instrument or track is playing & adjust
the threshold until just the louder parts are causing gain reduction. Then, use your ears... are the
louder parts still too loud? Try lowering the threshold until it sounds more "even". You don't want
totally kill all the peaks just smooth them out a little. It'll be a little hard to hear the difference
at first, but keep messing with it... also, if you can, compare the original signal with the compressed
one, this will give you an idea of what it's doing.
Also, if you hear a very obvious change in the sound (it sounds weird) your probably using too much
compression. You need to either raise the threshold or lower the compression ratio until it's less noticable.
It'll take a little trial & error but you'll get the hang of it in time!
GOOD LUCK!!!
Some information obtained from, MODERN RECORDING TECHNIQUES - (Huber & Runstein, © 1993)