A Sales Order can be cancelled when its status is still Pending Approval. It is not possible to restore (un-cancelled) a cancelled Sales Order. This feature is being tracked on Enhancement 28338: Allow cancelled Sales Orders to be restored (un-cancelled).
A Sales Order can only be closed after it was approved (Status = Pending Fulfillment). A Sales Order is closed when the user does not intend to fulfill open items on the order.
The user can re-open a closed Sales Order by doing the following:
Navigate to Transactions > Sales > Enter Sales Orders > List.
Click Edit on the Sales Order.
Navigate to Items tab.
Locate the line item then remove the check mark on the Closed column.