Compressors existed in previous versions, and do not exist currently. djoslin might bring them back. The following info is for historical purposes.
Compressors can compress air and water from a piston.
One Compressor can either compress both air and water (not at the same time), to compress air all you need is a compressor and a piston, whereas to compress water you need a Compressor, a piston and water (to make compressing water easier, you can build a funnel that the water is dropped into, allowing you to operate the piston without having to return to get more water).
Compressing can be made faster when you use a infinite looping redstone circuit that connects to the piston.
It takes 8 piston pushes to get compressed air, and there is no penalty for continuing to compress air passed the finish limit (a circle turns from grey, to green on both air and water compressors when finished).
To make a Compressor, place four iron bars on the corners of the crafting box, and one furnace in the centre. Currently, Compressors do not need any outside fueling to work (bar a piston).