Knowing when to replace your brake pads is an important thing. Safety aside, worn brake pads are a fast way to ruin a rim. This is what a worn set of brakes looks like:
Worn pad vs new pad
Most pads have a groove in them to show you when they are worn. When the groove is almost gone, the brake pad life is almost over. Rims also have a limited lifespan, and similar indicators. What prompted this investigation was this image on the popular website Imgur.com, someone was asking what the hole was for:
This is a wear indicator hole, it is a shallow hole in the rim that lets you know when your rims are worn to a dangerous level.
New Worn Indicator hole
Some rims also have a wear groove, which is a shallow groove all around the braking surface that serves the same purpose.
Wear indication groove
Why is rim wear an issue? When rims get worn, they get weak. They are more prone to collapse, and can even be crushed by the pressure applied through the brakes. It's all fun and games until catastrophic wheel failure happens! So check your pads and rims every now and then. Read more about rim wear here.