Explanation:
Cancel-based incomplete recovery allows the DBA to run a database recovery for an indefinite period, defined on the fly by the DBA as the recovery executes. During the course of the recovery, the DBA may choose to issue a CANCEL command, and the recovery will stop. The cancel-based recovery offers the DBA unmatched control over the execution of database recovery; however, it carries with that control the responsibility of the DBA to monitor the recovery process.
Incorrect Answers:
2: Recovery is not stopped by pressing at <CTL-C> the recovery prompt, but by entering CANCEL at the recovery prompt.
3: Recovery is not stopped after the database has committed all changes up to the specified point-in-time (it's time-based incomplete recovery), but by entering CANCEL at the recovery prompt.
4: Recovery is not stopped when the database has committed all changes up to the specified system change number (SCN). It's description of change-based, not cancel-based, recovery.
5: This answer shows all possible incomplete recovery scenarios, not only cancel-based one.
Oracle 8, DBA Certification Exam Guide, Jason S. Couchman, p. 705
Chapter 15: Advanced Topics in Data Recovery

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