In Azure SQL Databases, what is the importance of “compatibility level”?

The significance of "compatibility level" in Azure SQL Databases primarily lies in how it influences the behavior of SQL features and optimizations available for the database. The compatibility level is a setting that determines which SQL Server features are available and how certain features function within a given database. It creates a bridge between different versions of SQL Server, allowing databases to operate under settings that reflect previous versions.

When you set a database to a specific compatibility level, you enable or alter the use of various Transact-SQL constructs, query optimizations, indexes, and certain behaviors of functions. For example, a higher compatibility level may introduce new features, while a lower level retains older query processing methods. This flexibility is particularly valuable when migrating a database to a newer version of SQL Server, as it allows developers and database administrators to ensure that existing applications remain functional while leveraging new optimizations in the SQL engine.

The other options touch on important aspects of Azure SQL Database management but do not accurately reflect the role of compatibility level. This focus on behavior and optimizations underscores why choosing the correct compatibility level is critical for database administrators managing databases across different environments and versions.