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This refers to a method of squeezing a widescreen movie onto a television screen. How is this accomplished? Exactly what we said -- the original frame is "squeezed", or visually compressed, horizontally until it fits, likely using an anamorphic lens (which works not unlike a Fish Eye Lens).
Technically speaking, the anamorphic process is not used specifically to fit a widescreen image into a TV screen, but rather to fit a widescreen image into Academy ratio (4:3) film; then, when projecting, the same type of lens is used again to unshrink the image, returning it to its original aspect ratio. (This proces uses up the maximum amount of grains/pixels in transit.) Visual Compression occurs when a film is recorded using an anamorphic lens, but then projected using a normal lens, which does not undo the "squishing" of the image.
Visual Compression can be thought of as a compromise between Pan and Scan and Letterbox; unlike the former, Visual Compression preserves the entirety of the original frame, and unlike the latter, there are no empty spaces above or below the frame.
On the other hand, Visual Compression does noticeably distort the image, which can have a rather discombobulating effect on the viewer. For this reason, Visual Compression is almost never used for the entirety of a film, being restricted instead to brief uses such as credit sequences or just to create a weird look and feel (such as a Dream Sequence). It does, though, turn up in shorter venues, for example in music videos (Soundgarden's "Black Hole Sun" and Paula Abdul's "Promise Of A New Day" spring to mind). Some widescreen TV sets also have the option of stretching non-widescreen material to fit the screen, in case their owners are lucky enough to not be able to notice the distortion.
Contrast Pan and Scan.
Not to be confused with Video Compression, which reduces a video's file size for electronic storage.