Yeast is the magical ingredient that makes flour into bread.  A living organism that is killed by high heat and will remain dormant if cold, it requires some warmth and food to grow.  Dry active yeast is usually found in the form of small granules, and will keep extremely well (1-2 years) if stored well chilled in the fridge or freezer. 

Compressed or "fresh" yeast is harder to find and more difficult to use than dry yeast, it needs to be used in a week or two, and it must be creamed with warm water and sugar first, whereas dry yeast does not require this activation and can be added immediately to the flour.  When yeast grows it gives off carbon dioxide, which is trapped by the gluten structure in the dough, this expands and causes the bread to rise.  If the dough is left rising too long in warm conditions it will turn "sour".

To test if yeast is still in good condition

1. Measure 1/4 cup of really warm water into a cup.
2. Add 2 teaspoons of dry yeast.
3. Add 1-2 teaspoons of sugar.
4. Stir well, leave for 10-15 mins.
5. If yeast foams up over the top of the cup in about 15 mins it is OK.  If still and not foaming - dead, throw it out.
   

Yeast measurements and conversions.

2 t dry yeast  = 7gms dry yeast = 15gms fresh yeast  = ½oz fresh yeast