In chess, compensation is the typically short-term positional advantages a player has in exchange for typically material disadvantage. Short term advantages involve initiative and attack.
Compensation includes:
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A rook on the seventh rank (the opponent's second rank) is usually very powerful, as it threatens the opponent's unadvanced pawns and hems in the enemy king. A rook on the seventh rank is sufficient compensation for a pawn (Fine & Benko 2003:586). In this position from a game between Lev Polugaevsky and Larry Evans, the rook on the seventh rank enables White to draw, despite being a pawn down (Griffiths 1992:102-3).
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A famous 1960 game between future World Champions Boris Spassky and Bobby Fischer began with a King's Gambit opening. White sacrifices a pawn on his second move:
reaching the first position shown. Fischer examines an alternate fifth move for Black:
reaching the second position, where Fischer explains "White has more than enough compensation for the pawn." (Fischer 2008:123)