What does AES256-CTS-HMAC-SHA1-96 mean in relation to Kerberos?
Decoding AES256-CTS-HMAC-SHA1-96


AES256 = AES using 256-bit key
CTS = ciphertext stealing
HMAC-SHA1-96 = HMAC using SHA-1 hash function with mac truncated to 96 bits.


The benefits of HMAC truncation are discussed in FIPS PUB 198-1, chapter 5.
For HMAC-SHA1 96 bits is very common truncation, used for instance by IPsec/ESP.

For figuring out what key material is used, it is decided by Kerberos. Please, read the appropriate standards.