As a writing system Chinese characters were first devised to represent the Classical Chinese language. Classical Chinese differs from modern Chinese languages in a number of ways, most importantly in that it was largely monosyllabic, with one word generally being one syllable, which was thus written as one character.
Over time previously distinct sounds started to merge together. The language compensated for this by joining together different syllables to form words.
Rabbit for instance, in Modern Mandarin isn't written as one character but two (兔子). The first character 兔 itself means rabbit but the pronunciation (tù) assigned to the character is not enough to convey the information when spoken so the second character 子(zi), a diminutive suffix, is affixed to it.
Not every character in Chinese is necessarily a word but rather each functions as a morpheme. Morphemes are the bits that words are composed of, so for instance the words "cats" is composed of two morphemes "cat" and "-s". "Cat" on its own functions as a word but "-s" does not. Even so, "-s" has a distinct meaning in so much as it indicates plurality.
In Chinese languages words are generally one or two syllables and thus are written as one or two characters respectively. In two syllable words each character will often have its own meaning.
To use the example of rabbit, the word has two characters 兔, meaning rabbit, and 子, which is just a suffix and doesn't have much meaning here.
If you want to say, for instance, rabbit meat however, you can drop 子 and add 肉 (meat) to get 兔肉. As I wrote above, because the pronunciation for 兔 is not enough to indicate meaning when spoken alone, another syllable has to be added to provide context.
Essentially, in Chinese languages, you can pick apart and recombine words to form others, so long as the meaning is clear.
孩子 child: 孩(child)+子(suffix)
男孩 boy: 男(male)+孩(child)
男人 man: 男(male)+人(person)
人口 population: 人(person)+口(archaic word for mouth - as in number of mouths in a family)
出口 exit: 出(to go or come out)+口(like the mouth of a building)
出發 to set off/head out: 出(to go out)+發(to send)
發燒 fever: 發(to send)+燒(to heat) - as in to send out heat/be burning up
燒烤 barbecue: 燒(to heat)+烤(to roast)
For concepts that aren't native to china, like golf, the word is often just written out in Chinese characters that resemble the pronunciation.
高爾夫 Gāo'ěrfū Golf
加拿大 Jiānádà Canada
Other times a new word is coined based on what the thing is.
自行車 (self go vehicle) bicycle
電視 (electric + to watch) television
洗衣機 (wash clothes machine) washing machine
To simplify, Chinese characters aren't necessarily each words, rather they're the bits that make up words. Some words are a short and some are long so the number of characters per word will vary.