I recently saw a game where a player on the defense knocked down a pass. He was given a yellow card and sent to the sin bin. It looked like the referee said the word 'cynical'. Is there a difference between a knock-on and deliberately knocking the ball down (which is what it appeared happened)? Why does this behavior warrant a yellow card?
A deliberate knock on is a penalty as opposed to an accidental knock on that results in a scrum. In the case of a defender batting down a pass, the referee has to judge whether they think the defender was actually trying to catch (intercept) the pass or just trying to knock it down to prevent the pass from being completed. The later is a penalty, you have to be trying to catch and control the ball.
As for the yellow card, if this occurred near the defenders try line, or if there was a good chance of a try being scored had the pass been completed (i.e. was going to a winger with no more defenders on the outside) then this constitutes what is sometimes called a 'professional foul'. This is grounds for a yellow card. Essentially if the referee thinks a player deliberately incurs a penalty in order to illegally stop a play that has a good chance of leading to a try a yellow card should be given. This is more typically given for infringements in the ruck, such as lying over the ball to prevent the attacking team from retrieving it, but other circumstances such as the one you describe also fit the description of a professional foul.
The terminology of 'cynical' I haven't heard before, but it is referring to the same concept.
To extend on the previous answer, a professional foul (i.e. intentionally breaking the rules) should always generate a penalty. So deliberatly knocking on the ball is a professional foul. Yellow cards can also be given for intentionally pulling down a maul, infiringements at the breakdown and others.
As @Bogdanovist mentioned in his answer, a yellow card will be given if the penalty prevented a try. If it was a certain try (no doubt in the referee's mind that it would have been a try) then a penalty try can also be awarded.