I just don't understand what apple means by the touches canceled event and how is it called.
I'm not really sure Tim addressed your question so I'll take a shot at it.
touchesCanceled is called when the OS needs to interrupt the user. It gives you a chance to clean up whatever you've been doing in touchesBegan and touchesMoved.
More specifically, it is called when the user puts the phone to his/her face turning the screen off, or if a notification like incoming call or new text message occurs.