Hi kw,
In the term "Dynamic Range Compression", the compression refers to the volume range of the audio you are editing. It is used to bring the loudest parts and the quietest parts closer together thereby reducing (compressing) the dynamic range of the audio. This means that running a DRC can reduce the output of the loud parts of your audio and boost the quiet parts. I highly recommend reading through the link that Alex posted to Wikipedia's explanation on the subject.
Exactly what happens when you apply a compressor depends on two main things. First of all, the settings you are using in the compressor and secondly, the audio signal you are compressing. If you open the DRC in WavePad and click the "Default" button, you should see that the DRC curve is just a diagonal line running from bottom left to top right. Applying this curve should have no effect on an audio signal. The reason for this is that the "dB in" value (horizontal axis) and the "dB out" value (vertical axis) are identical at all points on the curve. Knowing this, you can now target exactly how you want to compress the range. You may wish to boost the bottom and cut the top or just one or the other.
I hope this makes sense. If you need further explanation then please let me know. Maybe include a screenshot of your DRC curve?
Regards,
Ben