Bruno is young and misunderstands his parents when they tell him where they will be living. He thinks that they say Out-With, but they are really saying Auschwitz. It is part of the innocence of the story. When he doesn't understand the fence and why he cannot go on the other side, Gretel tells him,
" 'It's not called Out-With, Bruno,' she said angrily, as if this was the worst mistake anyone had ever made in the history of the world. 'Why can't you pronounce it right?'" (pg 181)
Auschwitz was a concentration camp created by the Nazi regime near the border of Poland and Germany. It contained both a gas chamber and a crematorium. It became a killing center and the place where the largest amount of European Jews were killed during the Holocaust.
out with is auswitch the number one concentration camp during the halocaust its right out side his window
Out-With is referring to the name of the concentration camp Auswitch in Poland. Bruno cannot comprehend it truly so that he cannot pronounce it right, too.