Cancelled order statuses : When an order has its status changed to one of those statuses, the quantities of products in it are restored.
Cancellable orders statuses : If you enter order statuses in that field, for all the orders with one of these statuses, a "cancel" button will be displayed on the orders listing of your customers on the front end. That will enable them to cancel their orders and you will be notified by email when that happens. Please note that payments won't be cancelled by that process so you will have to decide what to do.