In Yocto Project, PREFERRED_VERSION is a variable used in recipe files to specify the preferred or default version of a particular package or recipe. It allows you to define which version of a package should be used when multiple versions of the same package are available in the build environment.

When a recipe has a dependency on a specific version of a package, Yocto will attempt to find the preferred version of that package based on the PREFERRED_VERSION variable. If multiple versions of the package are available, the PREFERRED_VERSION variable can be used to prioritize one version over the others.