This paper presents the method and process of the real-time error compensation (RTEC) on NC machine tools, which includes: identification and measurement of error components, separating and modeling of geometric-thermal error components, geometric-thermal volumetric error synthesis model, compensation control system, performance evaluation of error compensation by the body diagonal displacement measurement, and the industry application of real-time error compensation. The technique has been successfully applied to many different NC machine tools in the plants for practical production, and the machining accuracy of the NC machine tools is improved by an order of magnitude with low cost.