Compound exercises move several joints and several muscle groups at once. Squats, deadlifts, presses, rows, and chin-ups are the classic examples. They build the most strength and muscle per unit of time, which is why they form the backbone of most sensible programmes.
An isolation exercise moves one joint and targets one muscle, such as a biceps curl or a leg extension. A compound exercise such as a chin-up trains the lats, biceps, forearms, and trunk together in a coordinated pattern. Neither category is superior in the abstract; they answer different questions. Compounds answer "how do I get strong and cover a lot of muscle efficiently," and isolations answer "how do I add work to a specific muscle without much systemic fatigue."
Because more muscle contributes, you can use heavier absolute loads, which creates a larger stimulus for the muscles and a stronger signal for the nervous system. They also train coordination between muscles, which is the part of strength that transfers to sport and everyday tasks. The mechanical reasons are explored in Biomechanics of Human Movement.
Use isolation work to add volume to a lagging muscle, to train around a painful joint, or to strengthen a specific weak link such as the hamstrings for sprinting. It is a supplement to the compounds rather than a replacement.
Put compounds first, when you are fresh and able to handle the technical demand, then add isolation work afterwards. Two compounds plus two or three isolations is a complete and time-efficient session.