From the Halo Editing Kit Reference on this site:
When compiling using Tool the following warning message appears:
### WARNING found # degenerate triangles.
There is an error in the construction of the triangles that compose the level geometry.
Check for triangles that have had edges turned or have been modified such that 2 edges of the triangle now exist in the same space (share the same vertex coordinates).
These will often appear in 3ds Max as a single edge when in fact it is just the collapsed or malformed edges of a triangle all occupying the same space.
Specifically, its under Level Design > Multiplayer Level Design > Level Compilation.