Compressors decrease the dynamic range of a signal. So if you record a guitar take that starts very softly and ends loudly a compressor can make the quiet parts louder while keeping the loud parts at the same level (so they do not clip/distort).

the level at which the compressor starts working is the threshold

the amount it compresses the signal is controlled by the compression ratio

The amount that these parameters affect the signal depends on how high the input level is. The higher the input the greater the compression. and the overall level is controlled by the output level.