Your location, fine (GPS) location:
Needed by the compass for calculating the true north.
Network communication, Full Internet access, view network state:
Needed by the compass to download ads from the internet. They are the income stream of the compass developers.
System tools, Prevent phone from sleeping:
Needed by the compass to disable the sleep mode, while the compass is on.
Why is the compass file so big?
Because this compass contains high definition images. But the size shouldn't be a problem, because the compass can be installed on sdcard.
Why does this compass has ads?
The ads are the income stream of the compass developers and they are the reason why this compass can be free.