I pick up beach rocks regularly, that have holes like this through them, the glacier left them behind in our area and Lake Michigan's worn them smooth. Most are 1/2"-3" in size, with small holes mostly formed by either iron pyrite that's eroded out OR (and this is usually) holes started where a fossil was embedded and is now gone.
They're light enough to string on a cord, and my mom had been collecting these for years (she finally sold her 5' long strand). I take the ones I find and sell them for a dollar at the medieval festival, they get a gold cord through them with a tag about 'fairy holes'. I'd found only a little online, the stories differ. Either looking through the hole allows you to see things as they really are, without the fairy 'glamour', OR you can see the land of fey through them. At least that's what I've been putting on the tags.
But I've heard from someone pagan that natural holes in river rocks do have a sort of power of their own, so are prized for that. The ones I've found all seem to be a very light gray, not a yellow, dark gray, black, shade of brown or any other color. So when I look for them I watch for that color in particular. Some have very nice holes, some have barely a space worn through all the way. Some have stones wedged inside but those can be popped out since they didn't originate there and just were jammed in by the wave action of the lake.
Hey Lark! I've been finding mine at Doctors Park in Milwaukee, got 14 there the last visit! I heard there are some nice stone beaches north of here at Harrington State Park, and over east on the Michigan shoreline as well.
