Z described file compression well. It is useful for making music files small so you can carry all of your music around with you. Here is an example. The Eagles "Victim of Love."
On the left is the standard CD file ripped to wav & then 2 different compressions - AAC which is the iTunes download standard & a really small MP3 version. The smaller the bitrate, the less information you hear.
On the right is a 24/96 version - a high def version if you will. A flac (which is a file compression of sorts but lossless) & the totally uncompressed wav version of the same.
But what I was referring to in the post above was music compression which is done in the studio. Compression can be used to judiciously to 'even out' the waveform to create a coherent finished song. Overused on a whole song it can compress it for louder playback. Here is a video from Fab - a mixer buddy from NYC who explains the 'good' music compression well.
Ian