Key cancellation means making that key stop opening the lock, even though it still exists and someone may have it in their pocket.
Some cylinders are designed for this: that is the case with the construction key, which cancels itself when the owner’s key is used, and with certain systems that let you lock out a particular key. With most ordinary cylinders it is not possible, and the way to achieve it is to change the cylinder.
You need it when a key is lost or stolen, when a tenancy ends, when the person who looks after the house changes or when you buy a resale property. If you do not know whether your cylinder allows it, the practical thing is to change the lock cylinder and have peace of mind.