Why do people cut the lugs or treads on offroad tires?

Answer 1

If the tire is to be used only off-roading, modifying the tread can help the tire (self clean) not to get clogged with mud. Only certain tires should be modified, so not to compromise the integrity of the tire.

Answer 2

It's called tire tuning
It is an attempt to make a production tire perform better for trail applications, there are a few advantages, they include better tread flexibility and the addition of more biting edges. A tire with more flex in the tread rolls easier over rough terrain since it can better mold to obstacles, and in doing so provides better traction and improved ride quality. the removal of tread also makes the tire lighter, all this means that you can run higher tire pressures while maintaining full tread contact with the trail.