This is where the cover of the comic has been printed with a cut out. A cutting tool is specially made in the shape required (The Die) and this Die is then pressed onto the cover, cutting out of the paper the required shape.
A few examples below include:
Wolverine #50 - Had Logan's claws die-cut on the front cover
The Protectors #5 - which had a die-cut Bullet Hole on the front cover which goes through every page within. Every page would have had to have been cut with the Die (Unless they managed to do the whole comic book in one go)

