If you are going to rely on accurate compass reading it is essential that you understand the relationship between Magnetic North, Grid North, and True North.
First, here are some definitions:
A. True North (and South) are at the geographic poles which are the points where the earth's axis meet the surface. In the northern hemisphere, the position of the North Pole is indicated by the Pole Star which itself can be located by following the pointers from the Plough.
B. Grid North is used to orient Ordnance Survey maps. It differs very slightly (see below) from True North except along longitude 2 degrees West. Usually, it's acceptable to ignore this difference.
C. Magnetic North/South is the axis along which a compass needle will align itself in the Earth's own magnetic field. Unfortunately, this Magnetic North is not the same as Grid North. In the UK at the moment, magnetic north is 3 degrees west of Grid North. Therefore 3 degrees is the magnetic variation.
Maps are oriented to Grid North and not Magnetic North - and the difference between the two is usually shown in the map margin. You'll need to allow for this difference when converting between a map bearing (based on Grid North) and a Compass bearing (based on Magnetic North).
In the UK, the Compass bearing is always greater than the Map bearing. To convert from a map bearing to a compass bearing ADD the magnetic variation. To convert from a compass bearing to a map bearing SUBTRACT the magnetic variation.
This can be easily remembered using the phrases:
'Add for Mag(netic) - Get Rid for Grid'
or (with thanks to Andy Batters from York)
'Mag(netic) to Grid Rid - Grid to Mag(netic) Add'