Back in the dusty anals of computer history, the punch card reigned supreme. In the 1960s, it was punched to reflect a class a college student was taking. The student would go to the department they wanted to take the class from and receive a punched card, which, when all the classes were chosen, would go to the central registration department, and the information read by a card machine.
Even government checks were issued via the punch card. This began back in the 1930s, and were seen as state of the art technology. Today, the punch card has faded into obscurity, but the concept remains the same, albeit it the information comes out in different forms.
"Do not fold" is pretty self-explanatory. If the card was folded, the information couldn't be read, and voile! the unlucky card holder could not cash his check.
"Spindle" is a more interesting phrase. A spindle was a spike used to hold pieces of paper. When it was full, the clerk would usually remove the paper, run a piece of string through the holes, tie the bundle and archive it.
"Mutilate" is even more interesting. This word is usually associated with living things and to an evil intent. It seems to relate to not doing things to the card not covered under the "do not fold" and "spindle" categories.
Coming to the presence, thank God we don't have to deal with punch cards anymore, although some hourly workers deal with punch cards when they punch in for work. However, these systems are not the antiquated systems of the past, even though the concept is the same.
All in all, when we deal with our writing, let's make sure we don't "fold, spindle or mutilate" our works. Let's be care not to bend our baby into a shape that doesn't work for the book. As most writer's can attest to, often the characters in the book "speak" to the author and dictate the plot. Go with the flow, don't overguess your story, but allow it to flow. Don't let it be the stiff cards of the past, but let it flow naturally. Yes, there are rules. But yes, you can break them, too.