A compression gauge is a cheap yet helpful tool to determine the condition and/ or diagnose any possible faults in the top end of your engine.
Testing is quite simple and only take a few minutes. Remove the spark plug and position the compression gauge into the spark plug hole. Turn the throttle wide open to ensure that the engine gets adequate air intake and crank the engine until the needle on the gauge peaks at it's maximum reading. Ideally, compression testing should take place after breaking in a new top end and engine temperature should be warm. Compression and temp readings should be recorded for future use.
A compression test should be performed every time the engine feels like it's lacking power, running roughly, hard starting etc. This will let you know if you need a top end rebuilt soon. Also, after a rebuilt or a series of engine modifications, a compression gauge will give you a strong indication of how close the engine is to detonation or preignition.
Generally speaking :
If your engine has more than one cylinder, compression readings between the cylinders should not exceed 10% but I wouldn't feel comfortable with more than 5% difference.
If a future compression testing shows a 20% reduction in relation to the one you had with a fresh engine, then most probably top end should be renewed.
Average readings of most two stroke cylinders should be in the region of 120-160PSI.