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For the most part, canceling is the act of interrupting a normal move with a special move. To perform a cancel in most 2D games you will input the command for the special move as the normal move hits.
The most obvious example of this is Ryu's crouching Medium Kick into Fireball. You are canceling out of the hit of the crouching attack allowing the Fireball to hit before your opponent recovers.
Last updated on February 8, 2010 by haunts