A cut or drop in fantasy football is removing a player from your team. The term gets used in more contexts than just literally taking players off your team. There are also variations of the term cut/drop, cut bait and drop candidate. These are terms used in reference to a player's performance, and whether he is worthy of being cut or dropped from a team. You will come across plenty of players during a season that are not worthy of keeping on your team and need to drop them in order to add on better players to your roster.
Often times, in reference to a player, you will hear the term cut bait or drop candidate. This means that based on their performance, they are no longer worthy of being on your fantasy team. Their status as a drop candidate can also be a product of a teammate of theirs overtaking their spot on the depth chart. If you have a team's starting running back, and that team's backup running back begins to perform well, it is possible that the original starter becomes cut bait in fantasy football because he is no longer the best performer on the team.