Fiber optic communication system offers high-speed, long-distance connectivity and integrates with effective data transmission for modern world applications. The primary challenges in optical communication lead to the detrimental impact of dispersion, which introduces more signal distortion and lowers the quality of data transmission. This research aim is to enhance the performance and reliability of the optical system design by addressing dispersion challenges. This review explores the fundamental analysis of dispersion, such as chromatic, polarization mode, and modal dispersion, and the factors that influence the presence of dispersion characteristics. This research also provides a detailed analysis of dispersion compensation techniques and their necessity for maintaining the integrity of optical communication. Furthermore, the proposed review analyses the passive and active compensation techniques and highlights their significance and limitations. Active dispersion compensation, such as dispersion compensating modules and Digital signal processing methods, are investigated for dynamic optical networks and their adaptability. However, the passive dispersion compensation techniques, such as fiber Bragg gratings and dispersion-compensating fibers, are examined in detail, listing their ability for dispersion mitigation effects. Finally, this comprehensive review provides key insights into the developments and prospects in dispersion compensation techniques