In the network world, north-south traffic is traditionally defined as client-to-server traffic. In Neutron, as it relates to distributed virtual routers, north-south traffic is the traffic that originates from an external network to virtual machine instances using floating IPs, or vice-versa.
In the legacy model, all traffic to or from external clients traverses a centralized network node hosting a router with floating IPs. With DVR, the same traffic bypasses the network node and is routed directly to the compute nodes that host the virtual machine instance. This functionality requires compute nodes to be connected directly to external networks through an external bridge; a configuration that, up until now, has only been seen on nodes hosting legacy or HA routers.