Obsolete: You have the asset installed but you also have a new version of that asset installed.
Out-of-date: A newer version of this asset exists on the DLS and you do not have it. Note that you might not have the asset at all, in any version.
Minor correction to Shane's comment:
If you do NOT have the asset at all and it is flagged out-of-date, you can not download an update via the in-game content update feature. Probably obvious, but just in case it caused confusion.
To add to this:
The counter of the in-game updater will count the number of assets you have installed that are out-of-date and have the new version on the DLS.
A common mistake is made in CM by trying to do the same count. The result will be much higher if you forget to add the "location = local" filter as it also will count all out-of-date assets which you do not have installed. So if trying to download updates via CM (as I always do), be sure to have that filter in place.
To add some chaos or confusion:
An asset that is not flagged as out-of-date can still be out-of-date if the updated version is on a 3rd party website; the flag only shows up if the update is on the DLS.
Enjoy

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