The technique you are referring to is called microfracture. It is designed to help full-thickness articular cartilage lesions heal. It seems that if left alone, the body doesn't heal this area fully or completely.
It is both a safe and effective treatment technique. Many studies have been done and reported on. Results seem to depend on choosing the right patients. The lesion must be well-contained and not too large.
Surgical technique is also important. The surgeon uses an arthroscope to work inside the joint. The area is cleaned and smoothed in preparation for the procedure. Any pieces or fragments of cartilage should be removed.
Then special surgical tools called awls are used to make tiny holes into the bone marrow. Tiny drops of blood and fat from the marrow seep into the holes and fill them. This is the start of the healing phase. Before leaving the joint, the surgeon will also take the time to look for any scar tissue or meniscal tears that require repair or removal.
By drilling through the subchondral bone, channels are formed that allow bits of bone marrow to clot in the holes. A network of blood clots form into a scaffold. Capillary vessels then form to supply the area with blood supply. Stem cells from the bone marrow form into new cartilage cells.
The fibrocartilage that forms isn't the same as natural cartilage. The surface is not as strong and must be protected carefully during healing. The results are usually excellent. Pain relief, restoration of joint motion, and return to full function can be expected.