A landing cancel is a highly specific kind of cancel, performed to negate the effects of the stun often incurred when landing from a jump or, say, something like a backstep.
Usually, a game will punish someone slightly with a short stun when they land from a jump. However, certain games will allow you to cancel this (perhaps as a bug, perhaps as a feature). Perhaps the best case study is one game where it is a very commonly-used bug: Street Fighter Alpha 3 (see below). Other games with landing cancels (like KOF ’95) do not have it so crazy.
The arcade and PlayStation versions of SFA3 allow you to perform a landing cancel. The Dreamcast version and any later version do not allow this, as it was not an intended ability.
Utilizing a bug with the knockdown evasion system in SFA3, an opponent cannot actually use the evasion it if the attacker does not go into a normal standing motion. Therefore, if your opponent sets you afloat, then uses the landing cancel to crouch or something, they can use virtually any kind of juggle hit on you. So depending on the character, they can use infinite or death combos on you. Particularly when using a custom combo, where it is possible to cancel a special move’s recovery, it is possible for a single hit to turn into one of these awful contrivances, basically making V-ism the game’s primary balance killer.
This technique is generally tolerated in the arcade, and most Alpha 3 meets will allow its use. In fact, the updated arcade version (Street Fighter Zero 3 Upper) is generally shunned in Japanese tournaments because this bug was fixed.
Usually this kind of game-breaking bug is the hallmark of a crappy game, but that doesn’t mean people will stop playing if there are redeeming factors (witness Hokuto no Ken or KOF ’95, other games that run more on popularity and inertia than on fairness).