Definition
An outseam is the seam along the outside of a trouser or shorts leg, from the waist to the hem; it also names that length as a measurement.
The outseam is the side seam of a pair of trousers. It joins the front and back leg pieces from the waist down to the hem, and on most patterns it carries the pockets: in-seam pockets sit in its upper part, and slanted front pockets open into it.
As a measurement, the outseam, or outside leg, is taken at the side, from the waist to the desired hem length. It roughly equals the rise plus the inseam, which gives you a quick check: if a pattern's outseam minus its inseam is much longer than your own rise, the waist will sit higher on you than intended.
The outseam is also where you see whether trousers hang straight. A side seam that twists toward the front usually means one of the pieces was cut off grain, or the front and back were stretched differently while sewing.
On elastic-waist garments such as pull-on shorts, the outseam is often the simplest place to adjust the fit: pin out the same width on both sides if the shorts are too wide, or sew with a narrower seam allowance if they are tight at the hip. Make the same change on both legs so the garment stays balanced.