Start here. This is the direct spoken answer to practice first.
Why this question matters
CancellationToken matters because production APIs should not keep expensive work running after the caller has gone away or after the operation is no longer useful.
CancellationToken is .NET's way to request cooperative cancellation. In ASP.NET Core I can accept a token in the action method and pass it to database calls, HTTP calls, and other async operations. The token does not kill the thread; it lets the called code notice cancellation and stop safely. This helps avoid wasted work when a client disconnects or a timeout is reached.