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Compressor pedals affect your guitar signal in the same way studio outboard compressors do, but they are designed to be much more user friendly as well as portable and durable for a life on the road.
When a signal is compressed, the difference between the loudest peak and the quietest point in the signal (known as the "amplitude") is reduced in decibels by a defined amount, effectively "squashing" the signal.
Compared to the original signal at the same volume, the compressed signal will sound fatter, and tweaking a compressor pedal's settings can often enable you to increase pick attack and sustain too. Perfect for that rip-roaring solo!