Inflation is the sustained, broad-based increase in prices across an economy. It is usually measured as the annual change of the CPI (Consumer Price Index). With 3% annual inflation, €100 today is worth roughly €97 of purchasing power one year out.
It has direct implications for your personal finances: cash on the sidelines loses real value, fixed-rate loans get relatively cheaper, and salaries need yearly reviews to keep up.
To save seriously long term, your returns need to beat inflation. That is the direct link between inflation and compound interest.