The scar is from a wound received from a wild boar . Homer digresses immediately after Eurycleia recognizes the scar and tells the story of how Odysseus went hunting while on a visit to his maternal grandfather. The same wound becomes important on two other occasions. It is how Odysseus reveals himself to Eumaios and Philoitios before the Battle in the Hall (Book XXII) and to his father (Book XIV).
By a scar above his knee. The servant, Eurycleia, had raised the boy who is now a man. Assigned the duty of bathing the guests, she recognizes this unique scar and puts the pieces together. You will find this scene in Book XIX
Eurycleia is Odysseus's old faithful housekeeper. She helped to raise him through his childhood, and did the same for his son Telemachus. Even though he has been gone for twenty years, she is still loyal to him. When he comes back to Ithaca, disguised as an old beggar, nobody recognizes him at first. However, Eurycleia is assigned the task of bathing the old beggar (bathing guests is a typical thing to do in ancient Greece, where hospitality or xenos was one of the most important virtues). She starts telling the stranger about her old master, and how much esteem she has for him (and even mentions how the old beggar looks a lot like him!) As she bathes his feet, she sees a scar above his knee, and immediately recognizes it as a scar that Odysseus got when he was younger, during a hunt for a wild boar. She is joyous and shocked. They have a sweet little reunion, but Odysseus convinces her not to tell his wife Penelope about his return quite yet.