The term "throw to space" or "throwing to space" is a basic fundamental of not just ultimate but in other sports that involve passing an object to another teammate. Examples include: hockey, basketball, soccer, football, and rugby. The term is used in a lot of these sports but is more colloquially (hope that's the right word :P) known as, "Passing it to where they are going to be."
It is much easier for the cutter to run to the disc and catch it instead of them having to turn around and catch it. On top of that, it is MUCH harder for the defender to catch up and defend the disc if it is thrown to space.
when throwing to space (or throwing to where they're going to be) , it is important for both the cutter (1) and handler (H1) to be able to communicate and understand where cutter 1 will be running.
In this example, H1 sees cutter one running to one side of the field. H1 anticipates where cutter 1 is going to be and throws it into that general area.
This is beneficial to the offensive team for many reasons including: the team will be able to advance the disc up the field easily, it is harder for the defender to catch up to the disc and defend it, and the cutter doesn't have to waste extra energy turning around or making another cut to catch the disc.
In the scenario where H1 does not anticipate where the cutter is going to be, in most cases H1 will throw it at the cutter (where they were) which is not good. It is much easier for the defender to catch up and make a defensive bid, it is harder for cutter 1 to catch it as they'll have to do some crazy stuff to turn around and catch the disc, and most importantly (in ultimate at least) the cutter could get injured when trying to make a pivot as they turn around to try to catch the disc.
In this example, H1 did not anticipate that the cutter was running to the open space on the field and instead threw to where 1 used to be. The defender does not have to run that much to make a defensive play and the cutter has to exert an unnecessary amount of energy trying to turn around and catch the disc.
In majority of the cases, if the disc is not thrown to space for the cutter, it will result in a turn over.
In some situations the thrower can throw an inside-out or an outside-in throw to make things easier for the cutter to run to the disc (although they will have to try to catch the disc at an angle).