The compound adjectives are called "kennings." They are used as metaphor to add to the elevated language that makes up a literary epic. They serve to add description without bulk, and frankly, they're just fun poetic devices.
Part of the reason for the use of kennings is the way the Anglo-Saxon language developed. New words incorporated to the language from other cultures made some for some grammatical comedy and plenty of confusion. It makes sense--the Germanic base of the language didn't blend easily with the romance languages of French and Latin. Noun and adjective placement is inconsistent, and until a true set of new "rules" developed, strange combinations helped clarify illustrations and images.
Kennings also served the poetic process, in allowing the oral tradition to preserve the story through alliteration and meter. Because the "scop" had to retain the information, the artistic form helped aid in memory.