I tried to read to understand as well. In short, with in-kind, if a big player (not retail) would want to sell their iBTC ETF they would get real BTC in exchange and not cash equivalent. In cash mean they get USD equivalent, forcing Blackrock to sell BTC at market price to pay the ETF holder. Probably to a certain extend, Blackrock would be able to hold the BTC and give cash from their reserve until buyer come back with a risk of course but I'm not sure how it works in practice.

If it's not correct I let other to add their knowledge.

I guess in kind means the market maker of the etf (the ones that post bid and offers continuously during the day and have the right to redeem shared of the funds at eod) receive bitcoin when they redeem. While in cash would mean they would receive cash based on a bitcoin price (i don’t know what they would use as ref, risk of manipulation). In kind is the obvious reasonable thing