This article is from the rec.arts.movies.current-films FAQ, by Evelyn C. Leeper email@example.com with numerous contributions by others.
Contracts under the terms of the Hollywood Director's Guild allow about
six weeks for a director to assemble a cut without studio
interference. This is fully edited and has a synchronized sound track,
however, it is usually not color-corrected nor density-corrected and
may not have the final music and effects track. In more recent times
due to an expanding video aftermarket, the term director's cut has
acquired a popular meaning that implies a finished final print,
different from the theatrical release, that the director has complete
artistic control over. [firstname.lastname@example.org]
Bob Morris (email@example.com) believes the first widespread use of
the term was with the 1989 re-release of LAWRENCE OF ARABIA.