Cutting on Action
Cutting on Action (a.k.a. Match Action) is when two shots are edited together during the movement of a character or object. When the movement at the end of a clip is edited next to a similar movement at the start of the following clip, it creates an "invisible" edit.
This technique can occur with any movement in a shot, whether a big action or a small one. When used, it makes a cut feel more natural, going unnoticed by the audience.
In the edit above, the cut happens in the middle of the physical movement of the female's arm moving to take the phone.
Cutting during a movement creates the illusion of CONTINUITY, which means maintaining consistent and continuous action. Two shots, filmed at different times, magically become real life in the audience's mind when placed back to back at the right moment. This "trick" ensures the audience stays engaged in the story.
Physical movement draws the attention of an audience's eyes, so cutting on the movement distracts the viewer from noticing the cut from one shot to the next. Typically, editors will find a good cut point in the middle of an action on each shot, to help create a more natural flow in the movement during the edit.
In the edit above, the Cut on Action happens as the male character sits in the chair.