What's Libsass?
The original Sass compiler was written in Ruby, which made it really slow. Libsass is a rewrite of the compiler in C++, which makes it insanely fast.
Alternative Compiler
The official Sass compiler is now written in Dart and it's almost as quick as Libsass. It also gets new features, such as the new module system, first. As a result, Dart Sass is now the default Sass compiler in CodeKit.
Libsass was the default compiler until April 2020. It remains in the app for backwards-compatibility with older projects. CodeKit will not automatically switch existing Libsass projects to the new Dart Sass compiler.
Enabling Libsass
First, make sure you've read Setting Language Options.
Libsass can be turned on for a single Sass file by selecting that file in the list and choosing "Libsass" from the Compiler pop-up button in the inspector pane.
You can also enable Libsass for all Sass files at once. Open Project Settings > Sass and select the "Libsass" option from the compiler popup button.
Compass Not Supported
Sass files in a Compass project will continue to use the old Ruby compiler because Compass is not compatible with Libsass or Dart Sass.
Since Compass has been officially discontinued, I recommend that you move to Bourbon instead. Bourbon is compatible with Libsass and provides much of the same functionality as Compass.