From what i can tell, Cancelled does nothing but change the status to say Cancelled.
It wont cancel the site, i can still access the site when the site should be cancelled.
Is there something im missing? i cant find any thing about the concel option on the forums.

When you are selling the website creation from the front-end and for example using VirtueMart to manage the order, it may happen that a order is cancelled, refunded, ...

We have create similar status for the website creation to identify that you have a website defined and "cancelled". When it is not confirmed, the wesbite is not available. In this case, this is the master website that is displayed.
This is also true with "confirmed" website that are expired. In this case, you can have a redirection to a specific URL that you have specified.