It is a cancellation fee for freelancers - if the publication sees your work and decides not to run it, you get the kill fee and you're free to shop the story to other publications. The fee is specified in the contract, commonly 25% but rarely higher.

The vague intention of the kill fee is as insurance against an article being a bad fit, but generally the contract wording is intentionally vague. You can imagine any number of abuses by unscrupulous publishers who have the option to solicit far more material than they intend to publish.

An analogous situation might be a software house outsourcing a task for a flat fee, then dickering around with payment and eventually announcing they've decided your software doesn't pass their new test suite and you can accept a 75% pay cut or gtfo. Bear in mind that day rates for writers aren't what they used to be, and generally can't do a great deal of investigative journalism in your pyjamas.