Compilation is introduce in Magento 1.6 and above. These versions by default has a compilation tool built into it. The compiler is disabled and your files have not been compiled initally when you configure the megento for first time. Basically the compilation process allows you to compile all the installation files in the Magento to create a single include path. This can increase performance by 30%-50%. This is useful for large website where performance matters, below are the steps to run the compolation process.
Steps for compilation process:
1) Login in to Admin panel.
2) Go to Admin»System»Tools»Compilation
3) Click on 'Run Compilation' this will compile all the installation files.
4) This will take a while and after sucessful compilation it will give status message.
