The compass in the Spit is on the floor; just in front of the stick.
The function of the side slip indicator is the same as the function of the ball guage in most other planes; and gives an indication of how "straight" you're flying.
If you imagine flying with a little bit of right rudder; and a little bit of left stick; you'll still be flying straight and level; but the fuselage will not be lined up perfectly in the direction of travel. You'll be flying "sideways"; or "crabbing"; presenting a much larger surface to the airflow and suffering unneccesary drag.
The side slip indicator and the ball guages are meant to show this.
Just as with a ball guage; the idea is to keep the ball in the middle; with the side slip indicator the idea is to keep it pointing straight up. Experiment with rudder; and you'll se how it works.
