Compund interest is the type of compounding that most people are familiar with. It refers to the interest that you earn when interest payments are reinvested.

Suppose you invest $10,000 in a compound-interest Guaranteed Investment Certificate that earns 8% annually, and is held in a plan where tax is deferred (such as an RRSP). In the first year, your $10,000 will generate $800 in interest. That $800 will then be added to your original investment principal In the second year,. you'll have $10,800 earning 8%, which will generate $864. That amount will then be added to your existing investment, and so on.
By the end of the tenth year, assuming that no tax has been paid, your $10,000 will have grown to $21,589. After 15 years, it will have grown to $31,722. And after 25 years, your original $10,000 will be worth $68,485 almost seven times what you originally invested, without your having to add a single cent.

The principle of compound growth also: applies to other forms of income.
When dividend income is reinvested in more shares of the same stock, it's called a Dividend Reinvestment Plan, or "DRIP."
Mutual funds, and segregated funds offered by insurance companies, also let you benefit from compound growth. Your earnings are usually reinvested automatically in more units of the underlying fund. Over time, the results can be even more impressive than the compound-interest example above, if the investment funds include potential for capital gains.