What does a C compiler actually do?

It takes human-readable source text and translates it into machine code for a specific CPU, in four phases. The preprocessor expands #include and macros into a single translation unit of pure C. The compiler proper turns that into assembly for the target architecture. The assembler turns assembly into an object file: machine code plus a symbol table, with addresses still unresolved. The linker then combines all object files and libraries, resolves those symbols, lays out the sections, and emits the final image. Two details separate a strong answer here. First, each .c file is compiled independently into its own object file, which is why the compiler can't catch a mismatch between how you call a function in one file and how it's defined in another, only the linker sees both, and only if the symbol names disagree. Second, gcc is not really "the compiler", it's a driver that orchestrates all four stages and quietly links the C runtime for you. On embedded that matters, because you're typically cross-compiling: the compiler runs on your x86 host but emits ARM machine code that can't execute there at all, which is why the toolchain is named arm-none-eabi-gcc rather than gcc.