Countersinking is done by making a cone shaped hole which allows a flat head fastener to sit flush when installed. This prevents any snagging or damage from the top of the fastener, which can happen if it isn't flush to the surface.
With wood if you don't countersink and force the screw into the surface it will not only look bad, but the stability of the wood will be compromised. The wood can crack and split from the screw being forced and the fibers become damaged and dented. Countersinking also allows you to have all your screws at the same consistent depth.
Counterbore is a similar concept to countersinking except the hole is bigger with a flat bottom to allow the screw or bolt to fit into and be flush to the surface. The screw or bolt has a flat underside that allows a sturdy stable hold.
The counterbore is often made large enough for a socket to go on the fastener for attachment.
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