What It Means
Cash-settled commodities close out at expiry by simply crediting or debiting the price difference to your account; no physical commodity ever changes hands. Delivery-based commodities require the seller to actually hand over the physical commodity and the buyer to actually take it, through an exchange-approved warehouse, if the position is still open at expiry.
How It Works
On MCX, gold, silver, crude oil, and natural gas are cash-settled: whatever profit or loss you're sitting on gets settled in rupees, and the contract simply closes. Base metals (copper, zinc, aluminium, lead, nickel), by contrast, moved to compulsory delivery starting FY 2019-20 under a SEBI mandate, so a position left open at expiry results in either delivering the metal from an exchange warehouse or receiving it, along with the logistics and paperwork that involves.
Warning
Most retail traders never intend to take or give delivery. If you're holding a base metals position, square it off before expiry unless you specifically want to go through physical settlement, since staying in past the last trading day pulls you into the delivery process automatically.