If this is a refrigeration compressor, the basic idea is that as the refrigerant leaves the evaporator is at saturation, or "wet." As the refrigerant travels through the piping to the compressor, the pressure decreases due to pipe friction, and the temperature increases from conduction of external heat into the piping. These effects make the vapor less dense, and add superheat. This is described as "dry" vapor. Because of the decreased density, the compressor moves less mass of vapor; i.e., its capacity is a bit less.
Each degree of superheat decreases the compressor capacity by some fraction of a percent, depending on what the refrigerant is and on what part of its pressure-enthalpy (p-h) chart it is operating.
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