Keilim, Chapter 3, Mishnah 1. In the second perek we learned an important principle about vessels of cheres, earthenware: the moment such a vessel breaks, its entire status as a receptacle for tumah comes to an end. It can no longer receive tumah at all, and if it was already tamei, the very act of breaking renders it tahor. Whatever happens to it afterward makes no difference: it will never again become tamei.
Our mishnah carries that idea a step further. Suppose the vessel never shattered, but a hole opened in its wall. The halachah is that a perforation wide enough to make the vessel unsuitable for the purpose for which it was fashioned counts as a genuine break: halachically we view the vessel as broken, and tumah has no hold on it whatsoever. What remains to be clarified, and this is exactly what the mishnah now supplies, is how big such a perforation must be, and that turns out to depend on what the vessel was designed to contain.
The Vessel Made for Food
"Shiur keli cheres letaher": here is the measurement of a perforation that frees an earthenware vessel from tumah. "He'asui le'ochalin shiuro be'zetim": where the vessel was fashioned to hold food, it becomes tahor once the hole is wide enough for an olive to drop through it.
Note how far this reaches. Even if this particular vessel is normally used for foods considerably larger than olives, such as walnuts or figs, the olive-sized hole is still the deciding measure. Once a hole of that size has opened up, the vessel is regarded as unusable even for the larger foods it holds, and it is tahor.
The Vessel Made for Liquids
"He'asui lemashkin shiuro be'mashkin": a vessel made for holding liquids is judged by liquids. As soon as the hole is large enough that the vessel can no longer hold its liquid, that is sufficient to render it tahor. Naturally, this is a far smaller hole than the one required for food, since liquid escapes through an opening that a solid piece of food would never fit through.
The Vessel Made for Both
"He'asui lekach ulekach": and what of a vessel designed for both purposes, food and liquid alike, such as a pot? The mishnah rules, "matilin oto lechumro bezetim": we impose upon it the stricter of the two measures, namely the measure of olives.
In practice, then, the small perforation that would already have freed a liquid vessel leaves this one entirely unaffected. Its former standing continues, and if it had contracted tumah it carries that tumah still, until the opening widens enough for an olive to drop through. The chumra governs here, and the vessel holds on to its tumah until the hole reaches that larger measurement.