In shooting, a method of adjusting the aim of your second shot by aiming to the left (or right) of the target by the same amount as you missed your target to the right (or left) on the first shot. This is obviously used when your sights aren't true, or when there are other factors boggling your aim (wind, large gravity wells etc.)
This term might come from the Kentucky Long Rifles, which were one of the first accurate long range guns. Longer range means that wind and imperfect sights have greater effects, making a new gunning term expedient. On the other hand, the term might not come from that at all. I don't think anyone really knows.
You might see Kentucky Windage referred to as Tennessee windage (this is much rarer -- but Heinlein used it in The Number of the Beast, and Google lists three pages that use it). More often it is referred to as hold-off, although hold-off seems to be used slightly more often for up and down adjustment, while Kentucky Windage is more likely to be left and right. For the most part they are interchangeable. If you want to specify up and down adjustment, you use Kentucky elevation. As you might have guessed, Kentucky Windage is an American term. I don't know if it's used overseas.