ok - compression is taking the lowest level and the higest level of the audio and kind of sqashing them and rounding it off. You have the ratio and the threshold. The threshold is the level at which you want to compress the sound. So if you set it to -3 the everything below that level will remain unaffected where as everything above it will be ‘limited’. The ratio is all to do with the change in output level that reslults from a given change in input levels. i.e witha artio of 1:1 the is no change in level, as for every 1dB change in input level the will be a 1dB change in output level - witha ratio of 1:3 a 3dB change in the input level will result in a 1 dB change in output level - quite simply reducing the gain and rounding off the sound.
when should you use compression???? - ok so you can compress anything, it really depens on the sound you are trying to achieve. With drums and bass especially you can make a really punchy sound by using high compression ratios and bringing the attack and release right down - for vocal, a more subtle approach will help keep the overall vocall at a more constant level and help it sit within the track a little better. As for overall compression of a track - i still dont feel completely confident doin it - its a real skill to be able to compress a whole track and have it come out sounding exactly as you want so i would leave that alone for now.
two things you should do to help are
1. read up about it, there are loads of good books and websites out therer thatcan explain everythign to you probably much better than me
2. play around yourself - get a drum loop or bass line looping - solo the track, attach a compressor and listen to what happens when you are playing around with it
hope that helps - will listen to the track when i get home form work 
Peace - j
