The projective space are (can be seen as ) a parametrization of the collection all lines
going thru the origin, i.e., the collection of 1-dimensional subspaces of a space. Projective
spaces can be defined over every field. Still, for the reals, you consider all lines going
through the origin. But every line thru (0,0) in R^2* can be identified uniquely by a point it
goes thru. We can then choose, for convenience the points in standard S1 that
a line goes thru. But then, we have that if a line goes thru p=(x,y), it also goes thru the
antipode of p given by (-x,-y). So we consider just one of these 2; e.g., we consider the
upper part of S1. But even then, (1,0) and (-1,0) are equivalen-- since a line
going thru (1,0) also goes thru (-1,0). So our projective real space can be seen as the
upper-half of S1 with (1,0) and (-1,0) identified. This is just a topological S
1.
As to compactness, you can show this using the fact that projective line is a quotient
space, i.e., it is the space S1/~ , where (x,y)~(x',y') iff (def.) x'=-x, y'=-y.
And quotient maps are continuous by construction. Then the projective line is the
quotient---continuous image --of a compact space , so it is compact.
There are generalizations; not only can we define projective line, plane, but we can also define PRn, and PKn , for K a field, by generalizing the concept of a line, plane, etc. in Kn, as the set of (resp.) multiples λk of some k in Kn, or as the collection of combinations λx+ty for a plane, etc. Of course, for fields other than ℝ , geometric interpretations are harder.
* From now on, line means line thru (0,0).
And then the concept can be extended to that of the Grassmanian, which parametrizes subspaces of different dimensions. The Grassmanian is also a manifold.