Books could be written about suspension adjustments but here is a quick and dirty explanation.
Damping in a shock is a resistance to movement. The higher you set the damping setting, the slower the shock will compress (compression damping) or extend (rebound damping.)
Increasing compression damping decreases chances of the shock bottoming during large impacts. Too high of a compression damping setting will contribute to a jarring ride over small bumps because the shock is not able to compress fast enough to absorb the impact. Too low of a compression damping setting will allow the shock to bottom unnecessarily. You have to find a balance.
Increasing rebound damping slows the shock's return to normal extension after being compressed. Too high of a rebound damping will cause the shock to extend too slowly after an impact and remain somewhat compressed for subsequent impacts, reducing its effectiveness. Too low of a rebound damping setting will cause the shock to extend too quickly causing the quad to hop or give you the feeling you are being bucked off. Again, you have to find a balance that works for the type of riding you do.