A dropout is the part of the frame that holds the wheel. Vertical dropouts are rear dropouts designed for easy wheel removal and installation because they face downward and offer usually one wheel position (for easy alignment).
Rear-Rack Precautions - There are two reasons careful bike placement can't be emphasized enough when using a rear rack. First, the bikes need to be high enough so that if you hit a rough stretch of road or a hole, there's no way the wheels can strike the ground as the car bobs up and down. Second, you must keep the wheels well away from the exhaust tailpipe to prevent the heat from melting tires, tubes and wheel reflectors (yes, it's really that hot).