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 the effect terms) are also used as to include additional consequences of this absorption: additional changes in the continuous spectrum from resulting emission at longer wavelengths. After a photon's absorption by the metal atom, the resulting emission due to its raised state of excitation can occur in steps, e.g., after an electron's orbit is raised by two, it can fall back one orbit at a time, thus emitting two longer-wavelength photons.
The stellar structure is also effected due to longer wavelength photons sent back into the star, also ultimately effecting the spectrum.
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.