You’ll be better able to adjust your suspension correctly if you first understand how it was designed to operate and can identify symptoms of incorrect operation. So here's a few basic rules of thumb to get you on the right track...
Preload and spring rate primarily affect how your suspension handles the big stuff, whereas dampening primarily affects how it handles the small stuff. But there is considerable overlap in who does what, so it’s a team effort. When they work together properly, you get both comfort and control over a wide range of riding conditions.
Compression dampening works with the spring to resist the wheel’s upward movement during a bump. In both the front and the rear suspension, for example, it helps the spring resist bottoming on big bumps, sharp rocks or deep whoops.
Rebound dampening works against the spring to resist the wheel’s downward movement after a bump. In the shock, for example, it keeps the rear spring from jamming the seat into your butt, and in the forks, keeps the front springs from pushing the bars into your face.
If they have not been adjusted to work together, the wheels bounce and slide rather than roll. And you get a lousy ride. Or crash and burn in the boonies. Too much compression dampening, for example, helps the spring too much, which produces a jarring, haphazard and uncomfortable ride over even the smallest rocks and bumps.
Too little compression dampening can also give you a "hard" ride if you have a "soft" spring -- especially if there is too much rebound dampening. The soft spring, and less-than-ideal compression dampening, allow the wheel to come up too much when it hits a bump, and the excessive rebound dampening keeps the wheel from returning to its "normal" position in time for the next bump. After a series of bumps, the suspension gets "stuck in a squat" with maybe an inch or two of travel. This is packing, and shows its ugly face as harshness in the handlebars or side-to-side swapping of the rear wheel -- even with the correct spring.
Rebound dampening in the forks plays a major role in how well your bike corners. The compression of the springs during a turn "push" the wheel into the ground. The correct rebound dampening "holds" the spring’s rate of return so this "push" is maintained until the turn is completed. Your front wheel develops good "cone effect" and your bike tracks through the turn smoothly and accurately.
Too little rebound dampening allows this "push" to get weak, then go away before the turn is complete. The wheel turns late or loses traction, and your bike turns wide or washes out.
Too much dampening allows this "push" to be stronger and longer than necessary to complete the turn. The front wheel bites too deeply, and your bike turns early and inside.
Compared to your present settings, more dampening slows the wheel’s movement for a firmer ride, whereas less dampening speeds the wheel’s movement for a softer ride.
For both rebound and compression dampening, turn the clickers out (CCW) to decrease dampening and in (CW) to increase dampening.