If you were to recover the database with a current control file, Oralce will know the last SCN of the last checkpoint. So Oracle can use the information in the archived and online redo logs to apply recovery up to that SCN. This is called a "complete" recovery.
If you do not have the current control file, your option is to use a backup controlfile. Which means Oracle does not know the SCN to stop applying recovery. So you tell Oracle that you are using a "backup controlfile" and that you will tell it when to stop applying redo by replying "cancel." When Oracle starts recovery, it looks at the datafiles to know the last time a checkpoint was performed on the datafile. Oracle now knows to start applying recovery to the datafile for all SCNs after the SCN in the datafile header. Oracle rolls forward transactions. But Oracle does not know when to stop, and eventually, Oracle applies recovery in all of your archived redo logs. You can then tell Oracle to use the redo in the online redo logs. Oracle will ask you where to find more redo. At this point, you tell it to quit applying redo by replying CANCEL.
Hopefully, you never have to use this command. This is because you multiplex your control files and have three copies of the control file, all on different disk units. So if you lose a disk unit, you use the control files on the other disk units. The only time you need this command is when you lose all of your control files. In this case, either use a binary backup of the control file or you re-create the control file with the CREATE CONTROLFILE command and then recover with the backup control file.
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