i think its used to signify a non returnable record/cd or a record that is deleted, if it doesnt sell too well it has the corner cut off and is sold at a cheaper price , although i think that some record company types use it to mark promos as well.........i could be wrong though

Lots of Powercuts stock used to have these holes. I was told it is so they can import them cheaper as damaged stock.

Officially called "Cut Outs". They are deleted or previously returned stock. US distributors did it to remaining warehoused stock or returns from shops that were sold as Sale or Return deals or part of the yearly percentage returns that shops were allowed to do. They were then sold off to "Remaindered" distributors to offload cheap.
Good old FOPP used to have tons of Cut Outs that saved me a fair penny. Bob James, Deadato, Parliament comps...25 - 50p each!

who's to say that it wasn't previously returned, martin?

I only tell you what I know from my days in the record shops of old. They may very well do it for other reasons but of those reasons I know nooothing.

Mossey is correct. "Cut Outs" are product that have been returned. They are then accounted as "returned", meaning that no royalties are paid on them. They then are physically "cut out", meaning that the ends are cut or a hole is drilled through the package, and are sold at a discounted rate. Because they are now designated as "Cut Out" goods a discount royalty (if any) is applied.

Occasionally promos are "cut out" as well, so as not to be counted as part of full sales. Perhaps that is what you purchased Kaos.