What is it?: LJ cuts are a link that you can put in a livejournal entry that will hide everything after it from appearing on the main page of your journal, or on people's friend-pages. They'll have to click the link and go to the individual page for the entry, to read the rest of your entry.
Why would I use it?: This is useful (and considered polite) if:
How do I do it? The plain-jane version: To make a default lj cut, simply type <lj-cut> and it will appear as (read more) (except the words will be clickable) on your main journal page, and on people's friendpages. And people will have to click the link to read anything that you typed after the cut.
To change the text of the link: To make an lj cut with different text, type <lj-cut text="Click here to read about my day"> and it will appear as (Click here to read about my day.)
Be careful with your editing!: Keep in mind that the text that you use as the LJ cut link will not appear to people if they are reading the page for the individual entry -- so if you type something like So I met David Boreanaz at the convention, and <lj-cut text="he said...">, make sure that after the lj cut, you repeat the words "he said" -- otherwise your sentences are going to look very strange.
Fancy stuff: You can also end an LJ cut, so that what appears on your main journal page and people's friend-lists could be [A paragraph of intro] [LJ Cut] [A paragraph of conclusion], while 15 more paragraphs are hiding behind the cut. To do that, type [The stuff you want before the LJ cut] <lj-cut text="The text of the LJ cut link"> [The stuff you want hidden by the cut] </lj-cut> [Stuff that you want to show on people's friend-pages after the LJ cut link].
You can make multiple LJ cuts this way, in the same entry, as long as you remember to close each one properly with the </lj-cut>. Each LJ cut link will take the reader directly to the part of the individual-entry page where that cut was placed.
If they scroll up, they can still read the stuff typed before that cut, though, so don't use the multiple LJ Cut trick if you have some stuff behind Cut 1 that people might want to avoid, while there's some stuff behind Cut 2 that is just cut for length. Like... Cut 1 is hiding spoilers, while Cut 2 is about your new kitten. If you're trying to avoid accidentally 'spoiling' people with the inside scoop on that new show Faith: the Really Hot Vampire Slayer, but you'd like them to hear about kitty antics, the safest bet is probably to make two separate entries.
Again, be careful with the editing there, making sure that whether people are reading their friend-pages or reading the page for the individual entry, all of the words in your sentences are actually present and accounted for!
What does [Unknown LJ Tag] mean? What did I do wrong?: "Unknown LJ Tag" shows up when you type a journal or community link, or LJ Cut link incorrectly. If you get [Unknown LJ Tag] it probably means that you have typed a - after the lj in "lj user" or "lj comm" when there should not be one, or you have left out the - in "lj-cut" where there should be one. Or possibly you included quote marks around the user or comm name. The only place you should use quote marks in any of the special LJ tags is when you're typing in the text="Text of my LJ Cut" part of an LJ Cut.