I know the compression test is done by screwing in a gauge in each sparkplug hole,how is the leakdown test different? Also heard of a leakdown dye test...

A leakdown test tells you WHAT is leaking. You apply compressed air through an adapter into a spark plug hole. Then you look or listen for where the air comes out. If it's leaking rings, it comes out the oil cap. If it's a burnt exhaust valve, it's through the tailpipe. If it's ruined valve seats it could be out both the intake and exhaust. IF it's a headgasket, it could blow bubbles in the coolant, or come out one of the adjacent spark plug holes.
The compression test is much better at determining how badly a cylinder is leaking. Together they can paint a pretty good picture of the health of an engine.
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Rob Bareiss, New London CT ::: 86 244DL, 87 244DL, 88 744GLE, 91 244: 808K total

I haven't heard of a leak-down dye test but a leakdown test is accomplished with a gauge set that has a valve, air coupling, and screwes into the spark plug hole. Once installed the cylinder is pressurized, then the valve closed. After this I'm a little fuzzy but I believe the procedure then is to see how long it takes the pressure to drop below a certain percentage of initial pressure.

Justin B.
83 Turbo