No.4 is to show both engines at 200% VE (1 Bar of boost) but the blue line is with 11:1 compression and the green is 9:1. As you can see, the 9:1 engine can use more timing whilst keeping peak pressure reasonable, and makes more torque than the 11:1 engine.
The ignition point is too late, meaning the peak pressure is created when the piston is already some way down the bore and the total pressure gain is reduced. You can see it in the graph as the dip just after peak pressure. This is because the fuel burn takes some time to get going.
Related to the above, to retard the ignition is to move it closer to TDC, so 20° is retarded from 30° as it is 20° 'before top dead center', which is 10° later in the cycle than 30° BTDC.
The reasons it affects torque are complicated, but are related to how fast the fuel burns. Because the increase in pressure is not instant, the fuel needs to be ignited early so that peak pressure is achieved when there is enough leverage on the crank to produce torque. If there is no leverage, i.e. at TDC, then no matter how much cylinder pressure you have, there is no torque output. Maximum cylinder pressure and maximum torque arrive at different points, max pressure at around 10-15° ATDC and max torque around 30-35° ATDC.
If you leave ignition too late, cylinder pressure reduces as the volume increases and overall torque output drops.