Bleed is the term for printing that goes right to the edge of the paper. If
you have images or backgrounds that you want to bleed off the edge of the paper,
then you must design your job larger than the final cut size. Bleeds are created
by cutting through the enlarged image or background. To create a bleed, make
your document .125" larger on all four sides. For example, artwork for a 4" x 6"
postcard should extend to 4.25" x 6.25".
On your proof and template, the bleed line is .125" (1/8") outside the blue cut line. Any ink coverage that extends to the edge of the paper should extend to the bleed line. If your art extends to the blue cut line but not the bleed, you may have unwanted white borders after trimming.