The Player Compass is a special in-game item that allows you to view the locations of nearby points of interest in the game world.
Using the Compass
Your Player Compass is always located near your left shoulder. To use the compass, simply move your hand over the compass and press the Grip button on your controller to grab it. Once it is in your hand, you can turn it by turning your hand to view the locations of nearby points of interest. There is also always a point of interest available labeled "North" to help you orient yourself. Points of interest will appear on the compass if they are within 500 meters of your current location.
When you're done with the compass, just throw it away be releasing the Grip button. The compass will automatically re-appear in its original location on your shoulder after about a second. You cannot "lose" your compass.
Party Voice Chat
In addition to the points of interest, if you are in a Party the compass will show you the location of party members that are in the same zone as you; party members appear as green arrows on the compass. If you hold the compass up to your mouth, the compass will turn red. This indicates the compass is in "Party Broadcast" mode. When you talk with the compass in this mode, rather than broadcasting your voice to other nearby players, your voice will be heard by your party members no matter where you are in the game world (even if you are in different zones or instances). This can be very useful for coordinating with your party to group up at a location or figure out where everyone is.