What does the term 'Lokottara' signify in Buddhist sect history?

It means 'beyond the world', referring to the belief that the Buddha was not a mere human but a supramundane being who only appeared human.

Buddhist Sects: Sthaviravadins vs Mahasanghikas Guide (2020 PYQ)

ID: HIS_PHI_2020_07 Ref: 2500 Years of Buddhism by P.V. Bapat

With reference to the religious history of India, consider the following statements:
1. Sthaviravadins belong to Mahayana Buddhism.
2. Lokottaravadin sect was an offshoot of Mahasanghika sect of Buddhism.
3. The deification of Buddha by Mahasanghikas fostered Mahayana Buddhism.

Which of the statements given above is/are correct?

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Correct Option: B

The Lokottaravadin sect was an offshoot of the Mahasanghikas. Their practice of deifying the Buddha directly influenced the development of Mahayana Buddhism.