Compression is applied by running an audio signal through a dedicated electronic hardware unit or through software in audio applications. In the context of audio production, the device is simply referred to as a "compressor".

In simple terms, a compressor is an automatic volume control. Using downward compression, loud sounds over a certain threshold are reduced in level while quiet sounds remain untreated. Upward compression involves making sounds below the threshold louder while the louder passages remain unchanged. Both reduce the dynamic range of an audio signal. This may be done for aesthetic reasons or to deal with technical limitations of audio equipment, which is seldom able to cope with the dynamic range the human ear can tolerate.

Compression may improve audibility of audio in noisy environments, where background noise can overpower quiet sounds so that a comfortable listening level for loud sounds makes quiet sounds inaudible below the noise floor while an audible level for quiet sounds makes loud sounds too loud. If compression reduces the level of the loud sounds but not the quiet sounds the level can be raised to a point where quiet sounds are audible without loud sounds being too loud.

A compressor reduces the level of an audio signal if its amplitude exceeds a certain threshold. The amount of gain reduction is determined by ratio: a ratio of 4:1 means that if input level is 4 dB over the threshold, the output signal level will be 1 dB over the threshold. The gain (level) has been reduced by 3 dB:

Compressors are, additionally, often supplied with attack and release controls that can slow down the response speed of the circuit to smooth the effect.

An expander performs the opposite function, increasing the dynamic range of the audio signal.

The signal entering a compressor is split, one copy sent to a variable-gain amplifier and the other to a side-chain where a circuit controlled by the signal level applies the required gain to an amplifier stage. This design, known as a "feed-forward" type, is used today in most compressors. Earlier designs were based on a "feedback" layout where the signal feeding the control circuit was taken after the amplifier.

There are a number of technologies used for variable gain amplification, each having different advantages and disadvantages. Vacuum tubes are used in configuration called 'variable-µ': the grid-to-cathode voltage changes to alter the gain. Also used is a voltage controlled amplifier which has its gain reduced as the power of the input signal increases. Optical compressors use a light sensitive resistor (LDR) and a small lamp (LED or electroluminescent panel) to create changes in signal gain. This technique is believed by some to add smoother characteristics to the signal because the response times of the light and the resistor soften the attack and release. Other technologies used include field effect transistors and a diode bridge.

When working with digital audio, digital signal processing techniques are commonly used to implement compression via digital audio editors, or dedicated workstations. Often the algorithms used emulate the above analog technologies.

Threshold is the level above which the signal is reduced. It is commonly set in dB, where a lower threshold (e.g. -60 dB) means a larger portion of the signal will be treated (compared to a higher threshold of -5 dB).