This is the absolute most essential diagnostic tool for anyone who builds engines or maintains a race car.  A compression GAUGE will only give you a number that compares sealing pressure in each cylinder and locate cylinders that are low in comparison to the highest readings.  This will give you no clue where the leakage is occurring or give you a scale of comparison.

The leakdown tester pressurizes each cylinder and registers the per cent leakage for a quantitative comparison.  Zero to 5% is fine, 10% is okay and it is downhill from there.

By listening to where the compressed air is leaking, one can diagnose:

• Rings if you hear it hissing out of the chain gallery from the bottom end.
• Intake valves if you hear it from the carbs. 
• Exhaust valve if you hear it from the tailpipe.
• Head gasket if it bubbles in the radiator neck.