First, if you invited attendees, you should remove all of them (so they get a
cancellation - which will remove it from their calendars).  You should also
mark the time as Free unless you want to keep it blocked out.

Then (e.g.) you could add CANCELLED to the subject or assign a Cancelled
category.  Depending on what version of Outlook you use, there are different
ways to mark certain items in another colour.  Alternatively, you could
create a second calendar and just drag the cancelled items in there.  Depends
what you're trying to achieve and how you want to see them....

In short, there isn't anything built-in to handle this scenario, so it's up
to you to come up with a system that works for you.