A counterbore can refer to a cylindrical flat-bottomed hole, which enlarges another hole, or the tool used to create that feature. It is usually used when a bolt or cap head screw is required to sit flush with or below the level of a workpiece's surface (By comparison, a countersink makes a conical hole and is used to seat a flathead screw ). A very shallow counterbore, such as one machined on a cast part to provide a flat surface for a fastener head, may also be called a spotface.
The uppermost counterbores shown in the image are the same tool. The smaller top item is an insert, the middle shows another three-fluted counterbore insert, assembled in the holder. The shank of this holder is a morse taper although there are other machine tapers that are used in the industry. The lower counterbore is designed to fit into drill chuck, and being smaller, is economical to make as one piece.
Counterbores are usually made with standard dimensions for a certain size of screw. The tip of the tool is called the pilot. Assuming the first, smaller-diameter hole has been drilled to the standard diameter for the particular screw size, the pilot will fit the hole with little clearance and will help to provide rigidity and hole center location (i.e., centerfinding). This is extremely helpful when running the cutter with a pistol-grip drill (to keep the tool from wandering) and on a drill press (for fast, easy return to coaxiality with the original hole center). The pilot matters little when running the cutter in a milling setup where rigidity is assured and hole center location is already achieved via X-Y positioning.