Cut-off price refers to the upper end of the IPO's price band. When a retail investor 'bids at cut-off', they are stating that they will pay whatever the final issue price turns out to be, up to and including the upper band. This is by far the most common bidding strategy used by retail applicants on book-built issues.
Bidding at cut-off is recommended for retail because it ensures the bid remains valid regardless of where the final cut-off price settles. Bidders who specify a lower price risk having their application rejected entirely if the final price is set above their bid. On heavily oversubscribed issues, this is one of the most common reasons retail applications fail validation.
Only retail investors (those bidding under ₹2 lakh) have the cut-off option. NII / HNI and QIB bidders must specify a particular price within the band. This is one of several SEBI safeguards designed to protect retail bidders from accidentally locking themselves out of an offering they intended to apply for.