So basically, code that looks like this:

Blah blah blah <lj-cut text="click this to read more">secret spoilers!!!!</lj-cut>. Blah blah blah?

will look like this (link to imgur gallery with two images).

edit: Sorry, this is in the HTML post editor, just to clarify -- I see magnuschase probably has the rich text editor covered! I also want to note that, as with Tumblr readmores, you won't see the cut if you go directly to a post's permalink.