Does anyone know what this means to describe an album? "THE COVER HAS BEEN MARKED DESIGNATING IT AS A CUT-OUT"

As I understand it, 'Cut Out" means that it is out of production and no longer in the mainstream distribution chain. There is usually what looks like a 1/2" or so saw cut in the top left corner of the album cover.

why would they cut the album?

It is called "remaindered" and the LP couldn't be sold for full price. It's the manf. attempt to move (sell) the remaining inventory and their way of identifying them.

Not always a saw cut in the album cover. Can be a hole punched or drilled in a corner or a corner clipped. I have seen examples where a hole was drilled thru the center going thru the cover and album.

Same as books where they clip the price off the dust jacket.

Terry

Notched or cut to indicate that it has been "remaindered" - like books are marked on the edge... end of the run is sold of cheap.

I've seen this with CD jewel cases, as well. Out near the corner, away from the disc, there is a very shallow sawcut, as if many cases were standing on edge, and all were cut, crosswise, in one pass.