A compressor bypass valve is a device that allows the turbo to continue spinning (free wheeling) when the driver has released the throttle. As the turbo spools up, the air is compressed and then sent on its way to the engine’s intake. When the throttle is released, quantities of compressed air are no longer required, and the excess pressure must be relieved. If not relieved, this back pressure returns to the turbo and abruptly reduces spooling, or in some instances stops it. Over time, this condition will damage the turbo.
For more info, see Four Things You Should Know Before Installing a Blow Off Valve