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In the context of oil drilling, perforation means punching a hole in the cemented casing tube of the oil well in order to reach down to the reservoir. This is normally done by lowering perforating guns with explosive charges into the well. Once a hole has been punched in the casing, a pipe is inserted into it that allows for oil to flow up through the well.
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"Oil wells near La Habra, 1920s." Photo courtesy Orange County Archives.
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References
Freudenrich, Craig, and Jonathan Strickland
2001 HowStuffWorks.com: How Oil Drilling Works.
http://science.howstuffworks.com/environmental/energy/oil-drilling.htm, accessed
November 18, 2014.