Line blanketing (or the blanketing effect, or line-blanketing effect) is an apparent portion of a star's (or other light source's) spectrum that appears reduced because there are so many absorption lines in a region of the spectrum that rather than resolving individual lines, the spectrometer just shows a reduction in the intensity of the whole region of the spectrum. Line blanketing is commonly the result of metals, and stars with more metals display more. The terms (probably particularly "blanketing effect") are also used intending to include additional consequences of this absorption: additional changes in the continuous spectrum consisting of more emission at longer wavelengths. After a photon's absorption by the metal atom, the subsequent emission due to its raised state of excitation can occur in steps, e.g., after an electron's electron shell is raised by two, it can fall back one shell at a time, thus emitting two longer-wavelength photons (fluorescence). This change in the resulting spectral energy distribution away from a black-body spectrum can be detected by color indices, allowing appropriate photometry to measure a star's metallicity (to less detail than would spectroscopy). The stellar structure is also affected due to the longer wavelength photons being emitted in all directions, including back at the star, returning some of its energy, ultimately affecting the spectrum even more.
I've seen the term blanketing explained two different ways: as the continuous coverage of the spectrum's absorption over a band, and as the resulting trapping of heat, as if the star is covered by a blanket.