Cut types tell Origin where to place the cutter in reference to your design. You access the current design's Cut Type using the menu in Cut mode. Cut Type is context aware; when you hover Origin over a design, that design's Cut Type will appear in the left.
The current design's cut type is Outside as indicated in the menu. The cut type for this design is saved so that it can be easily retrieved if you come back to a project months later.
Tapping the current Cut Type (in this case, Outside) reveals the Cut Type menu.
Changing the design's Cut Type changes the location where Origin places the cutter.
In an outside cut, Origin places the cutter on the outside of the design. If we created a 1"x1" rectangle in Design mode, an Outside cut would create a 1"x1" square.
In an inside cut, Origin places the cutter on the inside of the design. If we created a 1"x1" rectangle in Design mode, and used a 1/4" bit, an Inside cut would create a .5"x.5" square.
Using Pocket, Origin acts like a traditional router so you can hog the material out of the inside of an object. However, Origin uses its smarts to keep you from cutting outside the bounds, and as always, will retract if you do. Note that Auto will not work in this mode.
We always suggest following a pocket cut with an Inside cut to clean up the inside edge of the object. Pocket has a built-in offset to make this easy.
With an On Line cut, Origin places the center of the cutter over the center of the line. Engraving a path is a common use for an on line cut, or any other time when the diameter of the cutter is small. Note that offsets do not work in On Line mode.
A common use for the Guide path type is to align objects using the Grid tool. When a design is marked as Guide, you are unable to cut it.