My mother applied that medicine to the wound on my knee.
Literal
Mother [topic-は] my knee [possessive-の] wound [on-に] that medicine [object-を] applied-[benefactive-てくれた]
膝の傷に薬を塗る = 'apply medicine to the wound on the knee.' 塗る (ぬる) = to apply/spread. てくれた marks the action as done for the speaker's benefit. Multiple の chain: 私の膝の傷.