Cash settlement removes the delivery problem for underlyings you cannot hold — indices, volatility measures, economic readings. The clearinghouse simply debits the seller and credits the buyer.
For a trader the practical consequences are pleasant: no pin-risk, no unwanted stock, no borrow costs, and no chance of waking up with a six-figure share position from a one-contract mistake.
Example: short one index put struck at 5,000, settlement prints 4,987. You pay (5,000 − 4,987) × 100 = $1,300 and the position disappears. The equivalent physically-settled-option would have left you long 100 shares of an ETF worth roughly $498,700 to finance over the weekend.
Related: physically-settled-option, index-option, exercise-settlement-value, pin-risk