There are actually two modules that provide compression in Kontakt 2: the Compressor and Saturation modules. The Saturation module provides a different type of compression effect than the Compressor module. Its controls are much simpler, as it has only a Saturation knob plus an Output knob. This is the effect you’ll want to use if you just want to infuse a particular sound with a bit of warm compression or slight overdrive. By driving the module into negative values, you get an expander effect. The Compressor module is more complex and works just as a hardware compressor would. It has many more controls, including Threshold, Ratio, Attack, and Release, along with an overall output control. A pulldown menu lets you select between Classic or Enhanced mode, which preserves the high frequencies.
A word of caution: Not all sounds need compression, and those that do, often need less than you might think. The object is usually to produce a natural sound, not something that’s devoid of dynamics.