Compass

Compasses were added in the Seecret Friday Update 9 on September 10, 2010. The compass needle points towards the player's original spawn point, whether in your inventory screen, in chests, lying on the floor, or while holding it in your hand.

If the compass is brought into/crafted in The Nether or The End, the compass' needle will spin wildly and point in random directions, making it useless for navigation.

You do not actually have to build a compass to use it for navigation. Just place the necessary components into their places on a crafting table and it will point towards your spawn. This can save you some iron and redstone. One can also view the compass under the item statistics page, as long as one has made a compass at some point in the past. This method is useful since it requires no redstone, iron, or a crafting table.

Sleeping in a bed will change your respawn point, but will not change the original spawn point and the location the compass points towards.

Other than being used to find the spawn point, compasses can also be used to craft a map when combined with eight pieces of paper.

Trivia

 * The Compass, along with the Clock, is one of the few tools you can stack; there is no benefit to this since they do not have durability bars.
 * A Compass can be used no matter where it is placed: in a chest, on the ground, or even held by another person. All compasses are drawn using the same graphic, so they will all point identically.
 * A Compass points to the northwest corner of the block you spawned on, not the middle.