Engine compression is one of the three essential ingredients a gasoline engine needs in order to run (air/fuel mix and spark are the other two). When a mechanic speaks of compression, they're talking about an engine's piston rings' ability to seal in and hold air as the piston is forced up into a cylinder. If the piston rings seal well, when the piston is forced into a tight-fitting cylinder, the air in the cylinder, which has no where to escape, will become compressed.

The reason compression is important is twofold. First, the air/fuel mix in the engine cylinder increases dramatically in temperature when compressed creating better ignition and more volatile combustion. Secondly, compression keeps combusted gasses from passing by the piston rings and into the engine. If excess combustion gasses pass by the piston rings, power will be lost.