To provide something good as a balance against something bad or undesirable; to make up for some defect or weakness. The company offered free products to compensate for the inconvenience caused by the delay.
To pay someone money in exchange for work done, for something lost, or for some inconvenience. The insurance company will compensate the victims of the accident.
To act so as to offset a disadvantage or defect; to serve as a counterbalance. The increased strength of the steel compensates for its added weight.