I used to use compressors in the recording chain, back in the "old tape" days. With the headroom digital recording enables, I don't use them on incoming signals, unless it's for a specific effect.

In the digital realm I only use compression during the mixing process.

There's not much point using garden variety hardware compressors with digital recording. What/who gave you the impression this would be a good idea? A decent plugin will sound just as good and it has other advantages (like not getting stuck with the results). On the other hand, if you have a Drawmer, API, UA, Massey, Meek or other boutique compressor it may be worthwhile, but even then you can wreck a good take with bad settings.

Bass guitar anybody? if u use it on the way in, be light handed, until you really know how it works.

In a guitar rig I like the sound of a compressor ahead of any distortion, otherwise the distortion drops off faster than the volume, which sounds weird and a little wimpy. Put the compressor first and the guitar sustains into the distortion which sounds beefier and more natural if you don't overdo it. But this compressor should be part of the rig and well sorted before tracking starts. It's really hard to fix bad compression.

Dynamics are changes in level. Compressors are dynamics processors. Simply put, compressors decrease differences in volume over time. But that's an oversimplification. They can be used to flatten or enhance transients or extend sustain.

Compressor settings are specific to each situation. You generally can't expect presets or suggested settings to be much help because the way compressors react depends largely on the signal itself.