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.