It is possible to define a certain layer as a mask for other layers in the context menu of the dataframe > Advanced drawing options, which is very usefull. No data will be displayed where the area is covered by the masking layer.
Many times I would need it the other way round: Data should be displayed where the area is covered by the features of the masking layer. E.g. when I want a layer to display only data within a municipality I have to draw a polygon with the size of the whole extent and then subtract the area of the municipality. It would be easier just to be able to use the polygon of the municipality (which commonly already exists) and say "display everything inside the polygon".