What is the meaning of Microsoft Compatibility Level?
MSDN ALTER DATABASE Compatibility Level explains the behavior of the various levels. (just scroll down and you will find the comparison tables for the following topics )

you can find more specific comparison tables if you just change the Version from MSDN top menu (they are linked for top 3 versions in following list)


80 = SQL Server 2000 
90 = SQL Server 2005
100 = SQL Server 2008 and R2
110 = SQL Server 2012
120 = SQL Server 2014
Differences Between Lower Compatibility Levels and Level 120


sample line (The older query optimizer is used instead of new SQL Server 2014 engine which includes substantial improvements to the component that creates and optimized query plans )

Differences Between Lower Compatibility Levels and Level 110