It means you're trying to install a size 2 module into a size 1 slot, or size 4 into a size 2. Or something like that.

You can install smaller size modules if you want to save money or weight, but you cannot fit a larger module than the slot size.

If you're trying to fit things into a Military Slot there are only a limited subset of modules that will go in there.

Let's see what incompatible means:
1. incompatible, not suitable for each other, not compatible
Collocations:
as an adjective attribute: incompatible solutions
with adverbial determination: incompatible with each other, with each other, with each other

2. [technology, IT] not combinable, not suitable or interchangeable
Collocations:
as an adjective attribute: incompatible systems, standards, formats

3. [medicine] of organs, blood groups: incompatible
The term incompatibility comes from pathology, different blood groups, for example, are incompatible with each other.

I hope this explanation of the word "incompatible" is understandable from now on.
If not, I have another one up my sleeve:
Two plugs are incompatible.
One plug and one socket, however, are compatible.