How a Compass Works
No matter where you stand on Earth, you can hold a compass in your hand and it will point toward the North Pole. A compass is an extremely simple device. A magnetic compass consists of a small, lightweight magnet balanced on a nearly frictionless pivot point. the magnet is generally called a needle. One end of he needle is often marked "N", for north, or colored in some way to indicate that it points toward north.
As an analogy (since it is not really the way it's happening), think of the Earth as having a giant bar magnet buried inside. In order for the north end of the compass to point toward the North Pole, you have to assume that the buried bar magnet has its south end at the North Pole.
If you think of the Earth this way, then you can see that the normal "opposites attract" rule of magnets would cause the north end of the compass needle to point towards the south end of the buried bar magnet. So the compass points toward the North Pole.
To be completely accurate, the bar magnet dos not run exactly along the Earth's rotational axis. It is skewed slightly off center. This skew is called the declination, and most good maps indicate what the declination is in different areas (since it changes a little depending on where you are on the planet).
The magnetic field of the Earth is fairly weak on the surface. Considering the planet Earth is almost eight thousand miles in diameter, so the magnetic field has to travel a long way to affect your compass. That is why a compass has to have a lightweight magnet and a frictionless bearing. Otherwise, there just isn't enough strength in the Earth's magnetic field to turn the needle.