Dead money is salary that still counts against a team's cap for a player no longer on the roster, usually because they were released with guaranteed years left on their contract.
In HoopSim, cutting a player on a guaranteed deal leaves every guaranteed year on your books, each in the season it was due, and it counts toward the cap, the aprons and the tax exactly like salary. A non-guaranteed year leaves nothing, and neither does an option year that has not been picked up. The cut screen shows the exact hit before you confirm. Coaches have dead money too: firing a coach while over the luxury tax, or running over the coaching budget, carries into next season's coaching budget. The stretch provision spreads a cut's later years out over more seasons.
Rulebook: Dead money. Related: waive, stretch provision.