Plausible deniability a condition in which a person or organisation can safely deny guilt in a crime or other action, because their connection to the crime cannot be proven.
It can also protect individuals who does not wish to be involved in unethical or illegal projects by claiming them unknowing of the actions taken.
Plausible deniability may be false, a result of lies that cannot be proven against – if the person had actual involvement in the actions – or real, if information was withheld to protect the individual.
The concept as we know it was created by the CIA.
CIA would withhold information about unethical or illegal projects from senior officials, in case harmful information becomes public. Otherwise, they would be held responsible for their subordinates’ actions, as they hold the executive position.
In 1974 the Hughes-Ryan act was passed, which inhibits the CIA from using funds for such projects unless certified by the president.
The concept is used by executives in high positions, knowingly or unknowingly, to not damage their position.
It is also used in less serious, yet immoral situations, for example if you are partying at your friends house, and you see someone puking in a flower pot. You decide not to tell your friend that you saw it, to protect the person who did it.