Knife is the cutting die for envelope or wrapper blanks.
It is called a knife rather than a die because the latter is an object that makes an embossed printed impression of the stamp or indicium on the envelope.
The press head forced the cutting edge all the way through the stack of paper.
The cut blanks were removed from the knife and the process was repeated.
[1] The United Postal Stationery Society (UPSS) now has its own numbering system for envelope knives which is seeing more current use.