whereever a collision primitive with the "navcut" collision layer selected in it's primitve tab covers a navmesh, this is treated as inexistent.
it's the same as if there was a collision-box-shaped hole in it.
therefore, they're apparently needed wherever you want NO navmesh,
like, a default application, if you put a 2001 monolith in some exterior cell and don't want folks to bump into it,
you can acchieve this by just covering the area it takes with a navcut without needing to make any changes to the actual navcut at all
(so it won't ever cause any compatibility issues with other mods editing the same navmesh, hence it's almost always the preferable option where applicable)
this will always work, as long as the primitive is enabled.
if you disable it, it'll stop doing it's thing instantly -> the navmesh will be back to valid and npc's will walk there again
no objects "need" navcuts.
you'll add a navcut to an object to prevent npc's from bumping into it (see above), that's all
...some base object types come with a "obstacle" option btw: this does just the same, using that object's collision to cut the navmesh (without needing an extra primitive, except if you want to cut a bigger hole than the precise object collision's size is)
you'll never need navcuts for flora, since npc's walk right through them anyway (except if you don't want them to do just that of course).
and yes, these boxes can be any size. and they can also be spheres btw.
...covered them all or forgot one?