A compatibility mode is a software mechanism in which a software either emulates an older version of software, or mimics another operating system in order to allow obsolete or incompatible software or files to remain compatible with the computer's newer hardware or software. Examples of the software using the mode are operating systems and Internet Explorer.
A compatibility mode in an operating system is a software mechanism in which a computer's operating system emulates an older processor, operating system, and/or hardware platform in order to allow obsolete software to remain compatible with the computer's newer hardware or software.
This differs from a full-fledged emulator in that an emulator typically creates a virtual hardware architecture on the host system, rather than simply translating the older system's function calls into calls that the host system can understand.
Examples include Classic Mode in Mac OS X and Windows 2000's / Windows XP's / Windows Vista's / Windows 7's compatibility mode, which both allow applications designed for older versions of the operating system to run. Other examples include Wine to run Windows programs on Linux / OS X and Mono to run .NET programs on various Unix-like systems.