What is database compatibility level?

Compatibility level of a database sets certain database behaviors to be compatible with the specified version of SQL Server. However this setting is strictly specific to the database only.

Each version of SQL Server have it’s own native compatibility as below:

SQL 6.7 à    65
SQL 7 à       70
SQL 2000 à  80
SQL 2005 à  90
SQL 2008 à  100

However each SQL Server version’s supports it’s predecessor’s compatibility level till a certain time. (For example, SQL Server supports compatibility level 80, 90 and 100). Basically compatibility level of a database defines how SQL Server will support that database including design and coding of those database. (For example, key words as *= or =* are not supported in SQL 2005 onwards. However if your database is in Compatibility level 80 running on a SQL 2005 or SQL 2008 server, *= or =* will still work)