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Lateral entry means the admission will be directly in the second year of the course program chosen. You do not have to take admission in the first year and you will be directed to the second year of any undergraduate program. The criteria for admission is different for different universities.
For Engineering lateral entry students directly enters into the second year of their degree engineering. They must have completed a 3 years diploma engineering in their respective branch to get eligibility for the lateral entry program. After completing their diploma course they shall write an entrance examination for the enrollment in the university.
Credit transfer means getting credit for courses completed under one program when switching to another in the same university or another. Courses taken in one program can be transferred to same program in another university. Also you can tranfer them to a different program either in the same university or another one.