Ive heard about this here and there, but how do they work and can you change them?

A compression ratio of 8.5:1 means it takes the 8.5 and compresses it to 1 (in layman'* terms). It takes extensive head work, and perhaps new pistons to change this. If you really want to get nasty, change the crank.

Now you see why nobody does it. (at least not here)

It'* the ratio of the volume of air and fuel before and after the compression stroke. Easy exagerated example: a cylinder has a volume of 8.5 liters at BTC (bottom dead center, the very instant before the piston begins to move upwards), when it has reached TDC (top dead center) the mixture has been compressed to 1 liter.

With a forced induction engine, 8.5 is the general compression ratio used. If it is higher, the fuel will ignite on its own due to pressure, much like a diesel engine. NA enginescan use 10, 11, 12, higher numbers to get more power because the pressure is lower than a blown engine.

http://www.howstuffworks.com/engine5.htm

http://www.dunegoon.org/compression.html

http://www.smokemup.com/auto_math/compression_ratio.php

So that explains why you need high octane gas in a blown engine right? So it won't ignite early.

i read the howstuff works articles on engines and what not last night. I was wondering if there was an easy way to change this, but I guess not. How much hp does increasing the compression ratio, say, .5

You could have the head shaved to add a bit of compression....say 5hp? if you do nothing else to the head.