What does Cash Settlement mean?
Cash settlement is the process where upon the expiry or exercise of the contract is settled by cash rather than the actual delivery of the underlying product. In futures market, when the contract is written, it is assumed that actual settlement / delivery of underlying product will be done. However, in the real world most of futures contracts are settled in cash.
Futures Knowledge Explains Cash Settlement
Cash settlement is a preferred mode since it removes the cost involved in actual delivery of goods. This process also takes care of any chances of default in the future as the buyer and seller need to put margin and also daily gains / losses are settled each day.