The composites in Esperanto are formed by determination, juxtaposition and coordination. Nearly everything can be part of a composite (classical roots, affixes, prepositions, interjections, primitive pronouns and adverbs, numerals). Composites can have two or more parts. I will deal mostly with composites of two roots – the composites of more roots can be viewed as incrementally built words combining in each step two parts.

In composites of this type, one element determines the other element . Mostly, the second element is modified by the first one. The only exception are true suffixes (see 4.2 and 4.2.1) – they modify the preceding root.
Except the direction of determination, the composites can be classified also according to the result of the composition:
1) The semantic meaning of one element is modified, qualified or restricted by the other element.
2) The result is not restricted by meaning of the main element, but has a new meaning – the new meaning is a mutation of the meaning of the main element and its determiner.
duon|horo is not an hour (horo) that has a half (duono) length, but it is a half of an hour
Some words can be put in both groups, depending on their analysis:
antaŭ|ĝardena:
1) relating to something in the front of (antaŭ) the garden (ĝardeno)
2) relating to the garden in the front of the house (antaŭgardeno)
The inherent category of the main element is inherited by the result of the composition: dormi + ĉambro ◊ dormoĉambro)
In the theory presented in PAG, the composition is driven by so called rules of vortefiko rekta (Direct effect of the word). It states that the inherent category of the main element has an effect on the category of the determining word (in composites the category is not expressed by an ending):
1) The nominal element makes the preceding root nominal.
2) The adjectival element makes the preceding root nominal.
3) The verbal root makes the preceding root adverbial or adjectival (with meaning of predicative adjective).
However, some words have to be analyzed by rule of vortefiko inversa (Inverted effect of the word) – the category of the main element is influenced by the determining element.
I do not know if there are any rules for distinguishing which of these rules should be used. The problem would require further study and I do not use these rules.

Coordination is a composition of two or more words on the same level. It is impossible to say that one root is modified by the other.
E.g.: blua-blanka – blue-white, angla-franca – English-French, trafe-maltrafe – better or worse
These resulting forms can be treated as two words and can be separately declined:
La fotoj estas nigraj-blankaj. – The snaps are black-and-white.
Or can be treated as one word:
La fotoj estas nigra-blankaj.
Coordinating composites are mostly written as two (or more) separate words with hyphen between them. However, sometimes the ending is used only with the last element (nordoriento – northeast). Moreover, sometimes it is possible to see a form with endings in the middle of the word without any hyphen: (nigra (black) + blanka (white) ◊ nigrablanka = nigra-blanka – black and white). See also 4.3.2 3)