Compaction factor is the ratio of a material's loose volume, as it's spread, to its volume after it's compacted in place.
Hot mix leaves the screed thicker than it ends up under the rollers. A common rule of thumb is about a quarter inch of rolldown per compacted inch, a factor of about 1.25, so a 3-inch compacted mat comes off the screed at about 3¾ inches. The real number depends on the mix, the temperature and the rollers, so check it with a depth probe behind the screed and again after rolling.
Stone does the same. Crushed base spread loose commonly compacts by 15 to 25 percent depending on gradation and moisture.
The tonnage formula uses compacted depth, because the unit weight on the mix design is for compacted material. The factor matters on the lot. Set the screed to the finished depth instead of the loose depth and you get a thin mat. Order stone by loose cubic yards without allowing for compaction and you run short before the base is at grade.