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Background Remove / Knockout is normally used for taking out the product/object from its background for creating product catalogs, inserting an object to a portion of a design. Background remove/Knockout sometimes refers to the concerned service like Clipping Path / Image Masking when asked an object (like hair, dag, translucent images like glasses, blaze, rousing etc.) to leave it on clear background or on a new background.
Background Knockout service is needed to create transparency without losing the translucency, change / use a customized background, to placed on a catalog / magazine which work smoothly with fine edges.