A software license is said to be compatible with the GPL if derivatives of the licensed software can be licensed under the GPL.
Basically, this means that the license cannot include any heritable restrictions which the GPL does not permit; for example, if you had to give a copy of any derivative software to the orignal copyright holder, that would not be GPL-compatible.
The BSD License and other classical Open Source licenses are GPL-compatible, as they deliberately make virtually no restrictions on the licensee. Note, however, that the GPL is not BSD-compatible, as it does make certain restrictions on the licensee which are not present in the BSD License.
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