It is sort of stating the obvious to say a bit is used for making holes, but in most cases, the hole itself is secondary, often it is an entryway or a screw or bolt.
Wood core drill bits however can be thought of as a bit used when the hole becomes a little more important.
Although technically NOT a core drill bit, a hole saw is a very good example of what a core bit looks like and does. Just like a core bit, a hole saw is circular in shape and only the leading edge is lined with teeth, much like a sharks jaw in some respects. In a standard twist drill, some 90% of the shank has a cutting edge. Depending on the saw size, they make reasonably large holes in in a reactively short time.
Don't rubbish a wood core bit
Another major difference between a conventional twist bit and a core bit is, unlike a twist bit which turns the hole into rubbish, a core bit extracts the material from around the edge leaving one complete, circular piece of material. Initially you may ask why would this be important when the waste is going to be consigned to the rubbish bin anyway? However, in many applications, the material being drilled can be very expensive, some native timbers fall into this category. Remember too that these core bits can cut VERY large holes. So, if the so called “waste” can be extracted in one complete piece it can be recycled as a resource in another part of the manufacturing process. In fact, with specialised extracting core bits [called an annular cutter] the hole is not the aim, extracting a solid core is. An excellent example is in geology where scientists need an earth core or ice cap sample to study.
Lets expand on the subject
However for you and I and most hobbyists, a wood core bit is used for making an existing hole larger, much the same way as a spiral or cone step bit does [link to step bits]
Reamers also perform a similar task. Unlike the annular cutter core bit [above] these bits are solid, so they do not extract a complete piece of material and having no sharp point they can not be used as a stand alone hole making bit. In many cases, a hole is a hole, a passage way for a screw, but on other situations the accuracy of the hole is vital and this is the role that suits a step bit.
If you have ever tried to drill a hole with a large bit you will have experienced the frustration of bit wander. Maybe you began with a small diameter bit and then tried to enlarge it with a bigger bit and maybe ended up with an oval hole? Probably it wasn't terribly important to the job. But in some cases, it is. So in highly technical work or industry, where the size, shape, appearance, tolerance and trueness of the hole is paramount a wood core bit is used to take an ordinary small hole and turn it into a much larger thing of exactness, beauty and brilliance~
So, whilst a core wood bit might not be something you will use often if ever, hopefully now you have a better understanding of what they are and do.