Back in the day, when coins were made out of more valuable metals, people would take a sharp blade and shave off tiny amounts of silver (or other precious metals) from outer edges of the coins. They would accumulate lots and lots of shavings from the edges of many, many coins and melt the shavings down and then re-sell the metal for a profit. Milling the outer circumference of a coin leaves a very regular and identifiable characteristic to the coin. If you took a blade and shaved off the outside edge of it, you would remove the grooves/milling/ribbing. A coin that has the milling shaved off of it has less precious metal in it because a con-artist has stolen a small amount of it. This was a big deal when coins were still made out of precious metals.

This is not a problem in the 21st century, as the value of the metals used to manufacture US coins is less than the face value of currency that it represents.