A 'cabochon' is a highly polished convex-cut (meaning domed) gem that is not faceted. Many lapidarys are now adding bevel cuts to the tops of cabs, to add interest and sparkle to the design that some folks will call 'faceted', and some cabs are cut with flat tops, which are used in certain applications such as intarsia. Although the majority of cabs are cut from semi-precious material, cabochons are also cut from precious stones (think of a star sapphire or star ruby). Cabochons are not often drilled, but can be, depending on what use the jewelry designer needs it for.
Answer contributed by Dale "Cougar" Armstrong