The principle is quite simple. Air is an insulator and pretty good at resisting heat transfer. The surface of the chip and the heatsink are not perfectly flat and may be slightly misaligned leading to small pockets of air between the chip and the heatsink. By appying a very small amount of heatsink compound the air gaps are eliminated and the efficiency of heat transfer is improved. Too litle compound and the air gaps remain unfilled. Too much compound and an additional layer is formed between the chip and the heatsink. Better heat conductivity than air, but not as efficient as it could be. The right amount is probably half of whatever you regard as the minimum sized blob. Something the size of a 16 point O will be more than enough for most purposes.