For one, it means that it hides all the text put into the cut, so that you only see that by clicking on the post.

Take a look in here. Scroll down a bit. The entries with those bolded bracketed links are entries with LJ cuts. If you click on one of those entries, it will open it up, and you can see the full post. Until then, see how much easier it is to find individual posts? It's far less cluttered that way.

Also, on livejournal there is a thing called the friends page, where you can see all the posts made recently by your friends. Without an LJ cut, a post like yours is truly huge on the friends page, and requires a lot of scrolling to go past. It's considered polite to put long posts behind a cut.

Also, you use LJ cuts if you are saying something or using images that a person may find distressing or are not work safe. Then you use a cut, and warn outside the cut for what is in it.

I'd love to, but what's the fandom?