Compression and what the ratios really mean

You are pretty much on the right track. If you have a 2:1 compression ratio, for every 10db of input you get 5db output. The other control that impacts this is threshold. When you set the threshold, anything below the threshold is not affected by the compressor. However, once you get above the threshold the compressor starts kicking in. Other setting such as attack and release indicate how fast compression kicks and how soon it kicks out. These settings can help the music sound more natural and not processed.
 
Compression ratios like 2:1 and 5:1 can be instituted and still allows the music to sound natural. However, as you get above 10:1 it can become noticeable to the listener. Ratios like 20:1 are sometimes referred to as 'brickwall limiters' and stop anything from causing clipping. While not very musical, this is not a bad setting for the spoken word, such as a lecture.
 
One thing to watch out for is a thing called 'pumping'. This can occur when performing compression across the entire mix. The drums hits can cause the compressor to kick in, causing the compressor to kick in. The the compressor kicks out on the off beat. This can cause the entire mix to sound like a 'beating heart'.
 
The one book I tell everyone about is called "Guerrilla Home Recording - How to get a great sound from any studio no matter how weird or cheap your gear is" by Karl Coryat. It is a really good starters guide for folks just getting into the hobby. The Sonar Power books by Scott Garrigus are very good for the version of Sonar you are using. Scott frequents the Sonar forums and has a wealth of info (check out his web site DigiFreq) - and no, I don't get anything from either guy for pushing their books
 
Hope that helps