A compass is an instrument that will help you to find the Earth's magnetic north. This is nearly the same as the Earth's true north (compass dials adjust for it), and so a compass will always show you which way is north. If you are lost, knowing which way is north is important for getting your map the right way round.
Compasses are less important than they were because satellite positioning (GPS) is now a faster and easier way of getting an idea of where you are.
It is possible to make a compass using a magnet, a small piece of polystyrene foam sheet, a needle and a saucer of water. Stroke the magnet along the needle in the same direction for a few times. That magnetises the needle. Now place the foam on the water. It will float. Put the needle on it. The foam is just there to support the needle. The needle will turn until it points north. It's good fun.