the cutting offset is set for the distance between the tip of the blade and the center axis of the blade in order to compensate so that the plotter cuts the difference. if it is not high enough there will be ticks that do not cut on smaller circles and such,...if it is too high there will be over cuts and problems with smaller script fonts and the thin strokes on roman typefaces,...it is usually done when changing from one blade type to another per se a 60 degree blade to a 45 degree blade
edited to add,...these settings remain set when you power off (stored via eprom chip)but can be changed via the plotter keypad and or your cutting software and or driver settings