Process printing overlaps four plates — cyan, magenta, yellow, black. Drop black text straight on top with no special handling and the three colour dots underneath show through just enough to muddy the black. So most print software applies a "knockout" by default — it clears a hole in the CMY plates exactly where the black text sits, and prints black into that clean gap.
The name invites confusion with cutting a subject out of a photo's background (누끼, "cutout" in Korean design slang), but it's a completely different thing. A cutout happens during image editing — making the background transparent so only the subject remains. A knockout happens during prepress — clearing a hole so overlapping colour plates don't mix where they shouldn't.
Turn knockout off (so the top ink just overlaps everything beneath it) and colours mix into something muddier — but on the flip side, when plates are slightly misaligned, that overlap can actually hide the gap. That's exactly what overprint is for. Knockout and overprint handle the same trouble spot — where colours overlap — from opposite directions.
When to use
It's already the default in most print software, so you rarely toggle it yourself. If black looks muddy in a proof, check first whether knockout got switched off or overprint got applied where it shouldn't have.