From the Super Mario Wiki
The Drill Bit is an unused enemy from Super Mario RPG: Legend of the Seven Stars. Despite this, it is mentioned several times in the game (and even appearing once), among other various oddities.
Drill Bits seem to be related to Jabits, and are recolors of them (which virtually confirms the fact that they would've been either stronger or weaker versions of them if they'd stayed in the game). Their only real role in Super Mario RPG is being an unseen prototype lackey for the Smithy Gang (as one of the Manager's Pounders suggests in the game), although one of them actually manages to make an appearance at the end of the initial fight with Smithy (where he is one of three enemies who tells Smithy that it'd be best if he didn't get angry). However, they exist in the game's coding as enemies. Little is known about what role they would play in the game (or even why they weren't used), but it is known that they would say "This is for Yaridovich!" if Mallow attacked them with Psychopath.
Another instance of Drill Bit's surprising amount of publicity is that it was once listed in an old Nintendo Power guide. According to the guide, Drill Bits would have appeared in World 5, the location of Star Hill, Seaside Town, the Sea, and the Sunken Ship. Given Drill Bit's relationship with the Smithy Gang and Yaridovich, the enemy may have originally been one of Yaridovich's henchmen, especially since the guide places Drill Bit in the "Bosses" section.