The lateral compartment is that part of the knee where the femur articulates with the tibia - but referring only to the outer or lateral side.
Lateral compartment osteoarthritis of the knee: Biomechanics and surgical management of end-stage disease. Scott CE, Nutton RW and Biant LC. Bone Joint J. 2013 Apr;95-B(4):436-44. doi: 10.1302/0301-620X.95B4.30536.