In a ring game, all the chips in play must remain on the table. If you want to take chips off the table then you are required to cash out all of your chips. To "Rathole" is to remove chips from play during a session.
The basic concept is fairness; if chips come to the table to be won, then they must remain on the table and in play until the player who has won them leaves the game and therefore claims those chips as winnings. This is clearly a much larger offense at a no-limit table, where a ratholing player can limit their losses by keeping their stack artificially short.
Players rathole chips because they don't want to chance losing them back but the only legitimate way to do this is to stand up from the table and cash out. Then, if the room permits, you can sit down again or move to another table. Most rooms will not allow a player to cash out and then buy back into the same game for less chips but most will allow you to cash out when moving between tables, unless you are in a “must move” situation.
Ratholing can also hide winnings from a backer and shield your winnings (and perhaps your skill) from new players at the table but the bottom line is that players should have the opportunity to win all of ‘your’ chips that were previously were ‘their’ chips, in play during a single session.
Ratholing in a tournament is a violation of tournament rules and will lead to, at least, those chips being taken out of play; if not outright disqualification of the ratholing player.
