Declares that a parameter to a method must be "compatible with" one of the type parameters in the method's enclosing class, or on the method itself. "Compatible with" means that there can exist a "reference casting conversion" from one type to the other (JLS 5.5.1).

For example, Collection#contains would be annotated as follows:

interface Collection<E> {
  boolean contains(@CompatibleWith("E") Object o);
}

To indicate that invocations of Collection#contains must be passed an argument whose type is compatible with the generic type argument of the Collection instance:

Collection<String> stringCollection = ...;
boolean shouldBeFalse = stringCollection.contains(42); // BUG! int isn't compatible with String