The magazine cut-off was a device that separated the cartridges loaded in the magazine from the bolt/receiver, preventing the bolt from picking up a cartridge and feeding it into the chamber when the bolt was cycled closed.
There is lots of speculation about the purpose of the magazine cut-off, whether it was a safety device, a single loading device and so on. Below, in italics, is an excerpt from the British Musketry Reg�s of one time detailing the purpose of the magazine cut-off.
Musketry Regulations Section 53 Para's 264 and 265 264. Troops armed with rifles fitted with safety catches will invariably set the catch to safety before movement. The use of the cut-off is to be confined in their case to occasions when they are not actually engaged with the enemy, when it may be employed for the purpose either of charging the magazine without inserting a cartridge in the chamber, or to unload the rifle while retaining cartridges in the magazine. It is never to be used to enable the rifle to be used as a single loader, and is not to supersede the use of the safety catch. 265. In the case of rifles which have no safety catches, the cut-off will be pressed in and the rifle unloaded on all occasions.
The other most quoted purpose of the magazine cut-off was to separate the 10 rounds loaded in the magazine for reserve or emergency use. Basically converting the rifle to a single loader until an order was given to open the cut-off for rapid fire, such as when a unit may be surprised by a cavalry charge etc. This purpose is based on the old school tradition of volley firing where troops were seldom allowed to fire-at-will. Fire discipline was rigidly controlled by a senior NCO or Officer at almost all times.
Caution should be exercised if one of these sights is encountered, as one of the official modifications was to pin the sight so that it could not be adjusted. If the knob is forced, this small pin will break. Not a good thing. Photo courtesy of Richard Loweth Pictured below are images of the long range volley sights that were present on SMLE's until their official deletion in 1915/1916. The intent of these sight were to allow British platoons or company's to engage the enemy at a great distance up to 2800-2900 yards. This was not intended to be used as a precise aiming tool. It's effect was to concentrate the fire of a whole platoon or company on a single area, much like machine gun fire does today. Actually, it was the invention of the machine gun that rendered the volley sight system obsolete and it is why they were removed. Though SMLE's can still be found with the sights still intact. Images courtesy of Lewis Maynard