Compounding works in most part of our life . We don't consciously notice it. Say growing cattle , with each generation, number of cattle compounds .
Say fitness , with each weight lifting,number of muscle cells compound .

Like wise compounding works in equity too . Suppose you buy a growing business and keep it for very long time . The profit they generate in current year will be used as capital for next year . If they produce significant ROC , profits keep compounding .

With compounding profits , share price too keeps on increasing . We need to give sufficient time to enjoy full benefit.

If they don't have sufficient Re-investment opportunities, they will pay shareholders dividend.

If we keep buying the same company shares with the Dividends they pay . It will compound our holding percentage in that Company .

We are using a Dividend to buy extra share which will pay Dividend next year and so .

With each investment and mistakes , our knowledge in stock market too compound.
@dmuthuk