The Waypoint Compass is a tool added by BiblioCraft that points to user set co-ordinates in the world. The red side points to the destination.
There are two ways to set the compass coordinates. The first is to shift right click with the compass in your hand to bring up an interface where you can name the destination with the X and Z coordinatess for it. The second method is to right click the compass on a map frame way-point marker, when you do this correctly it will show the waypoint name and coordinates in the chat window. If you do it incorrectly it will just show previous location information or coordinates of 0.
Right clicking with the compass in your hand will tell you in the chat window the world coordinates it is pointing to like this: Destination Name @ X = -100 Z = 100