An open fracture, also called a compound fracture, is an injury that occurs when there is a break in the skin around a broken bone. In order for an injury to be classified as a compound fracture, the outside air (and dirt and bacteria) must be able to get to the fracture site without a barrier of skin or soft-tissue. Therefore, a bone does not need to be through the skin in order for the injury to be called a compound fracture.
Why the fuss about compound fractures? Because these injuries are open to the outside world, there is a very significant risk of developing an infection around the fracture. If an infection develops, there can be problems with bone healing. Therefore, compound fractures are generally treated with surgery to clean the site of injury and stabilize the fracture.