The reason for the notch on the side a butter knife is unclear. It may be purely decorative, or it may differentiate an individual diner's butter spreader from the butter knife used to cut pats of butter from a shared plate.
Butter spreaders are not the only table knives with notches. A fish knife has a notch that loosens and removes the backbone from a serving of cooked fish. A fish fork's notch also differentiates it from a dessert fork.
Butter knives and fish knives have blunt edges. Butter knives have rounded tips, and fish knives have pointed tips. The butter knife is the smallest knife used in a formal table setting.