Haven't located this within the thread, so here's a basic run down from multiple posts I've gleaned recently.
Theory (per Turbo Steve):
Compression is the Foundation of a TDI Engine
Just as in any other engine, a compression test can be used to find out how the rings, valves, and head gasket are holding up. The readings are taken at the injection nozzle holes or glow plug holes, depending on the manufacturer's recommendations. Remove all the nozzles or glow plugs before cranking so that the engine can spin as fast as possible, and disconnect the fuel shut-off solenoid wire to stop flow to the nozzles. Of course, the gauge must be capable of withstanding much higher pressures than those of gasoline powerplants.
Typical specifications are 400 to 500 psi, and if a specimen isn't up to these readings, it may be difficult or impossible to start (after all, compression is what ignites the fuel in a diesel). If one cylinder is 75 psi or more lower than its neighbors, it'll be apt to misfire, causing roughness and a loss of power and efficiency.
Once you've zeroed in on a "weak cylinder," squirt a small quantity of engine oil into the combustion chamber and do the test again. If your reading goes up dramatically, the rings are probably at fault. If the rise is small, bad valves are probably indicated.
Another distinctly possible failure is a blown head gasket, since a diesel's high compression (pressures) put terrific demands on whatever seals the joint between the block and head. A good indication that this seal has failed are very low readings on two
adjacent cylinders. By the way, don't forget to check the condition of the timing belt!
Compression testing tells you the condition of an engine's foundation, and should be done when you suspect internal parts of causing a problem. But there's a lot more to diesel diagnosis, and I'll break it down into the proper procedures for specific complaints.
Procedure (per Drivbiwire):
TDI uses the *glow plug holes* to test compression.
-Get engine to operating temp
-DISCONECT THE HARNESS GOING TO THE INJECTION PUMP AND THE FUEL SHUT-OFF SELENOID failure to do this WILL cause the pressure gage to explode!!!!!! (note: you will need to clear the codes when your done)
-remove all four glow plugs
-Hook up a battery charger to keep a uniform charge between cylinders
-Crank until the compression gage stops climbing
Tools:
S&G Tol Aid diesel compression tester kit 34900, includes VW adapter 34740
http://www.toolaid.com/products.htm
Fair prices:
http://www.sjdiscounttools.com/sgt34900.html
http://www.toolsource.com/ost/product.asp?sourceid=http%3A%2F%2Fforums%2Etdiclub%2Ecom%2Fshowthread%2Ephp%253ft%3D98918%2526highlight%3Dcompression%2Bgauge&dept%5Fid=500&pf%5Fid=58484&mscssid=AHM4WHWWVNAF9G0TT7QL0FX7BLDJ4NU7
Harbor Freight:
http://www.harborfreight.com/cpi/ctaf/displayitem.taf?Itemnumber=93644
Uber pricing (Snap-on):
MT33c compression gage (800 psi max) approx. $189
EEPV315A TDI Glow Plug adapter approx. $70
Hope that this helps, and thanks Wingnut!