It refers to the CompactSize encoding frequently used in the Bitcoin P2P protocol for integers (in particular, lengths of vectors). It's also called VarInt in some other protocol descriptions. Since it predates the BIP process (was part of the original 2009 Bitcoin protocol), it is not described in any BIP.
It encodes integers between 0 and 252 as a single byte, though bigger integers as 3, 5, or 9 bytes.
It is not in BIP340 because it has nothing to do with the digital signature scheme.
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