From SmashWiki, the Super Smash Bros. wiki
V-cancelling, or velocity cancelling, is a technique that decreases the knockback velocity of moves in certain situations. This is done by pressing the L button or R button a maximum of 3 frames before the hitboxes collide. In order to V-cancel, a player must be in the air, not in hitstun, not in an attack animation, and cannot have pressed the L or R button within the last 40 frames. V-cancelling reduced the initial knockback velocity to .95x the original, generally meaning that the decrease in knockback is around 5%. The difference is small, but can be useful in dire situations.
It was documented by Achilles1515 in September 2015.
V-cancelling can be used along with other techniques such as DI and Smash DI to reduce your knockback distance. Despite not being as effective as the other two techniques, it can mean the difference between life and death. For example, Fox's up smash can usually KO Falco at around 88% on Pokémon Stadium; however, with proper DI used in conjunction with V-cancelling, he can survive up to 102%.