After asking that very question, this is what Ghreyfain told me:
(copied from the old FWP site)
It's for allegiance, and covers anything with X in the name.
i.e. GOODBUTBLUE, GOODBUTRED, and FAMILIAR are all considered GOODCUTOFF.
Let me dig out my ea.ids and split it up for you...
10
1 INANIMATE
2 PC good guy
3 FAMILIAR good guy
4 ALLY good guy
5 CONTROLLED good guy
6 CHARMED good guy
28 GOODBUTRED good guy
29 GOODBUTBLUE good guy
30 GOODCUTOFF good guy
31 NOTGOOD
126 ANYTHING
128 NEUTRAL
199 NOTEVIL
200 EVILCUTOFF evil guy
201 EVILBUTGREEN evil guy
202 EVILBUTBLUE evil guy
255 ENEMY evil guy
It's useful for having fights between you and some blue-circled allies, say, and a band of bad guys who are red circled. The allies would be GOODBUTBLUE, and the bad guys would target GOODCUTOFF, being either summoned party monsters, the party, or the blue-circled allies.