What is a Compass:

A compass is an instrument for finding directions on the earth. It has a needle that will line up with the Earth's magnetic field at the location it is used. 

Why is the definition of a magnetic compass so complicated?

A magnetic compass does not point to true north.  Instead it the needle will align itself with the magnetic field in the area you are using your compass.  These magnetic fields vary over the surface of the earth.  Sometimes they will line up exactly with true north and sometimes they can differ from true north by 15 degrees east or west and and in some cases much more.

History of the Compass:

In China during the Quin Dynasty(221-206 BC) lodestones were used in fortune telling boards.  Lodestones are naturally occurring magnetite rocks common to a place called Magnesia in China.  During this early period the compass was only used on land.  By the eleventh century AD records of compasses being used to navigate on the ocean appear.  About the same time in compasses begin to appear in Europe as well.  These compasses were generally a magnetized iron needle on a reed or cork to keep it afloat in a container of water.  Eventually a magnetized needle that was balance on a spindle in a box came into use.  On the deck of a ship a needle balanced on a spindle would was not stable enough so compasses filled with a liquid often alcohol were used to stablize the needle.
 

How to use a compass:

The simplest way to use a compass is to tell you where the cardinal directions are.  Lets say that you are out somewhere driving around or walking in an area that you don't know.  When you realize that you don't know where you are or which direction you are going you remember that there is a highway running north south to your west.  All you have to do is pull out your compass and find north and then turn so that you are heading west.  Could be the same is you know that a river is north of you or that a city is to your east.  The objects you know about are so big that if you start heading in that direction you will eventually find your way.

Unfortunately over extremely long distances or when trying to find something small this hit and miss method will not always work.  Imagine if you are on a ship with limited supplies and you have to travel the length of the entire Atlantic ocean.  Even one day let alone one week could mean the difference between life and death for everyone on your ship.  With a good map though a compass becomes priceless and used correctly the compass will be able to guide you in to objects as small as a tree stump.

What is declination:

Declination is the difference between the magnetic field where you are using your compass and true north.  The magnetic field does not line up with true north, so declination is what we use to correct for this difference.  What makes this more complictated is that the magnetic field of the earth is always changing.  A hundred years ago the declination for the area you are using your compass would have been different.  Thankfully declination does not change that much in just a few years.