Mick’s right of course,  It’s for counterboring, when you forgot to cut the
larger diameter first.  Not that I’ve ‘ever’ done that.  Then had to make up a
plug of the correct diameter, use the original bit to mark the centre on the
plug, and use THAT as the centre of the required counterbore.

If only I had a set of counterbore bits.. 

Richard Wilson
Taalkin proppa in Northumbria