This create common knife block tool will check the active layer for overlapping entities and replace these with a single entity.
This option determines how the new entities are split in lengths.
Merge will create one entity to the full length of the overlapping entities.
Remove will create separate entities for each overlapping section.
The bridge options determines how to bridge the new entities.
Retain positions will position the bridges in the new entities matching the the result of the overlapping entities.
This option will rebridge all the new entities to their palette attributes.
Merge will add the bridges from all the original overlapping entities to the new entities.
Look Within Block
This option determines how common knife entities are searched for in the current layout. If this option is not checked, the search only covers entities in the top level blocks. If this option is checked, then the entities with in a sub-block will be checked for overlapping entities.
The tolerance defines the distance between parallel entities that will be treated as overlapping.
The palettes setting define the palettes or palettes types that will be checked for common knife entities. (see Cut Palettes master tool settings).