The format is:
<lj-cut text="This is the text that appears in the cutlink.">This is the text that's hidden behind the link.</lj-cut>
The "text" attribute is optional; if you leave it out, the cut link will say "Read more".
For example, the above code produces this:
This is the text that's hidden behind the link.
More lj-specific tags can be found here:
http://www.livejournal.com/support/faqbrowse.bml?faqid=75