Detonation is an uncontrolled or extremely rapid expansion of the flame front inside the combustion chamber. Ideally, you want the air-fuel mixture to ignite via the spark plug, and have the flame front expand and move evenly throughout the combustion chamber, reaching a point of maximum cylinder pressure just as the piston starts down the cylinder on the power stroke.
When detonation occurs, this smooth expansion is interrupted by a portion of the air-fuel mixture igniting ahead of the approaching flame front, due to the increasing temps and pressure. Similar to how a diesel relies on the heat of cylinder pressure to ignite the diesel fuel. Now you have two flame fronts expanding simultaneously, and when they collide you get that ringing noise characteristic of detonation.
Since high compression ratios produce greater power and are simple to manufacture, manufacturers like to employ extra squeeze to try and wring as much oomph out of their engines as they can. The limiting factor has always been the fuel...too low of an octane, and the fuel pre-ignites, defeating the purpose. Higher octane fuels are more resistant to self ignition due to heat and pressure, so they allow for the greater compression ratios resulting in more power.
