The sentence translates to
The worse has already passed.
lo used instead of
el? When am I supposed to use one over the other?
Whereas English has only one definite article, "the", Spanish has five definite articles:
I imagine you already knew the above. The interesting case is the fifth definite article:
Unlike the first four definite articles listed above, lo does not define a gender, and for that reason we say it has a neuter gender. This is very interesting because nouns in Spanish are either feminine or masculine. There is no such a thing a neuter noun in Spanish. However, using "lo" is possible to construct noun phrases with an undefined/neuter gender.
Let's examine the sentence in your question:
The subject in this sentence is "lo peor". As explained above, "lo" is a neuter definite article. This article is combined with the adjective "peor" (worst) to construct the noun phrase "lo peor", which specifies no gender.
When we write:
we don't specify the gender, because we don't know it. We could mean:
or we could mean:
or we could mean something else.
As you see, the construction "lo + (masculine singular adjective)" is very handy, because it allows you to construct a noun phrase out of an adjective.
In your example it's not evident, but I think it's also important to point out, that "lo" precedes an adjective in its masculine singular form. For example:
we don't say:
Your translation in your question is wrong.
That would be the translation if you used