Holey stones are stones with one or more natural holes through them. They're rare, so it takes some looking to find one. You'll have the best luck in stream beds.
Magical properties have been ascribed to these sorts of stones for thousands of years. Traditions about them are found all over the world. The Celts placed particular importance on them and they are also given particular significance at Indian burial mounds.
They are worn or carried for protection and are also hung in the home for the same purpose, particularly over your bed to prevent nightmares. In fact, the alternate name 'hag stone' comes from the belief that they kept away hags or witches, thought to be the cause of nightmares. They were, in fact, believed to be a sure fire cure for most witchcraft.
The stones are also believed to increase psychic ability and divination is undertaken by looking through the hole, particularly during the full moon. It's said that the hole is a gateway to the spirit world, allowing the gazer to observe it's inhabitants and vice versa. Holey stones are also believed to banish bad spirits and bring good luck.
Healing is another property ascribed to them. People, particularly infants, used to pass through holey stones large enough, particularly in the British Isles.They're considered particularly good for eye problems. Smaller stones are sometimes rubbed on the body of the ill person. Erotic by nature, they also are believed to promote fertility.