Improved microbial activity
Compost contains literally billions of microorganisms. The more you encourage microbial activity in the soil, the better plant roots can pick up nutrients.
Improved soil structure
Whether your soil is a heavy clay or a sandy mix, adding compost will benefit its structure. Clay soil has particles so fine that they stick tightly together and do not easily allow in air and water. Compost binds to the clay particles and helps open up the soil. Sandy soil has particles that are very coarse with lots of air space that allows water to drain through it very quickly. Compost fills these gaps and helps the soil retain water.
Improved soil chemistry
Soil conditions can range from extremely alkaline or acidic to nutrient excesses or deficiencies. Compost helps soil chemistry by softening these extremes. Many micronutrients are tied up in the soil and are totally unavailable to plants. Composted matter will bond to these micronutrients such as iron, copper, manganese and zinc and increase their availability.
Earthworms love it
Composted material provides food for earthworms encouraging them to multiply. Earthworm burrowing helps aerate the soil and their castings are a valuable source of nutrients and helps retain water.
Plant grown in soils amended with compost tend to be healthier, exhibit resistance to some diseases, are more resistant to pests, show increased drought tolerance and require less watering.
One last feature
Compost uses materials that would otherwise end up in landfills. Approximately 30% of what goes into San Diego County landfill is organic material (or 60% including paper) [San Diego County Waste Comparison Studies, 1992].