What is engine compression ratio and why is it important?

Compression ratio is the ratio of cylinder volume at BDC (bottom dead center) to volume at TDC (top dead center). Higher compression ratios increase thermal efficiency and power output by extracting more energy from combustion. However, higher ratios increase the risk of knock (premature detonation) and require higher octane fuel. Typical gasoline engines have ratios of 10:1 to 14:1, while diesels can exceed 20:1 due to their different combustion process.