Doesn't say (or look like) emery cloth – just a bit of thing cotton sheet perhaps.
As ASF suggests , I guess it's damping out the vibrations that result from the bit dancing about while cutting a non-circular hole. Just enough drag to dampen its enthusiasm. The drill centre must be jigging about nicely when it's making those trianguar holes.
Edited By Muzzer on 14/01/2016 08:29:48
Edited By Muzzer on 14/01/2016 08:33:52